Question

Chegg What are MPC, MPS, and the spending multiplier

Answer 1

MPC stands for "marginal propensity to consume," which refers to a rise in consumer spending for every unit of income level achieved.

Marginal propensity to save (MPS) is the percentage of a person's income that they put away for savings for every unit that their income level rises.

Spending multiplier = Increase in income level for each unit increase in autonomous spending = 1/(1-MPC) = 1/MPS Spending multiplier = Increase in income level for each unit increase in autonomous expenditure. This is further explained below.

What is a multiplier?

Generally, the amount by which the return on investment is greater than the investment itself is referred to as the investment's return on investment (ROI).

In conclusion, Marginal propensity to save (MPS) is the percentage of a person's income that they put away for savings for every unit that their income level rises.

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