Economics
Intermediate

Marginal Propensity to Consume

The fraction of an extra dollar of income that is spent rather than saved.

Formula

MPC=ΔCΔYMPC = \dfrac{\Delta C}{\Delta Y}

Variables

MPCMarginal propensity to consume
\Delta CChange in consumption
\Delta YChange in income

Example

Spend $80 of an extra $100: MPC = 0.8

Did You Know?

A higher MPC makes fiscal stimulus more powerful, because each dollar recirculates further through the economy.

mpcconsumptionmacro