Glossary · Macro · Fiscal policy

Marginal propensity to consume (MPC)

The fraction of an extra dollar of income that a household spends rather than saves. The rest is the marginal propensity to save (MPS), and the two add to one. A higher MPC means a bigger multiplier.

Also called: MPC, marginal propensity to save, MPS

Taught in: The Multiplier Effect

Related terms

Spending multiplier Tax multiplier

More from fiscal policy

Automatic stabilizers Budget deficit and national debt Crowding out Fiscal policy Policy lags

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