Marginal propensity to consume
Definition. The marginal propensity to consume is the proportion of any additional income that households spend on domestic consumption rather than save or otherwise withdraw. It is calculated as the change in consumption divided by the change in income, and lies between zero and one.
A higher marginal propensity to consume produces a larger multiplier, since more of each round of income is passed on as further spending. It is one determinant of the size of the multiplier effect.
This term belongs to The Multiplier Effect in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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