Marginal propensity to save

From Academic Kids

The marginal propensity to save (MPS) refers to the increase in saving (non-purchase of current goods and services) that results from an increase in income. For example, if a family earns one extra dollar, and the marginal propensity to save is 0.35, then of that dollar, the family will spend 65 cents and save 35 cents. It can also go the other way, referring to the decrease in saving that results from a decrease in income. It is crucial to Keynesian economics and is the key variable determining the value of the multiplier.

It is the opposite of the marginal propensity to consume. In the example above, the marginal propensity to consume would be 0.65. In general MPS = 1 - MPC.

The marginal propensity to save is measured as the ratio of the change in saving to the change in income.Template:Econ-stub

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