The Marginal Propensity to Consume and Save

The Marginal Propensity to Consume and Save

• The marginal propensity to consume (MPC) is the fraction of a change in income that is spent on added consumption
• The marginal propensity to save (MPS) is the fraction of a change in income that is devoted to added savings
• 0 < MPC < 1
• MPS = 1 - MPC

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