Finance

Marginal Propensity to Consume (MPC) Calculator

Determine what fraction of additional income goes toward consumption spending.

Change in Consumption ($)

Change in Income ($)

MPC —

MPS (Marginal Propensity to Save) —

Spending Multiplier (1/(1−MPC)) —

Interpretation —

Formula:
MPC = ΔC / ΔY
MPS = 1 − MPC
Spending Multiplier = 1 / (1 − MPC)

What is the Marginal Propensity to Consume?

The Marginal Propensity to Consume (MPC) is a Keynesian economic concept that measures how much of each additional dollar of income a household spends on consumption. If MPC = 0.80, for every extra $1 earned, $0.80 is spent and $0.20 is saved.

MPC and the Multiplier Effect

The spending multiplier (1/(1−MPC)) shows how government spending or investment amplifies through the economy. An MPC of 0.80 yields a multiplier of 5, meaning a $1 million stimulus could generate $5 million in total economic output.

Key Properties

Range — MPC always falls between 0 and 1
MPC + MPS = 1 — Every dollar is either spent or saved
Higher-income households typically have lower MPC values
Recessions tend to lower MPC as consumers become cautious