MPS Calculator
Calculate Marginal Propensity to Save (MPS) from income and savings changes or MPC
Calculation Method
Calculate MPS from Savings Changes
Additional amount saved when income increases
Additional disposable income received
MPS Results
Economic Interpretation
Moderate propensity to save - balanced saving and consumption
• $0.30 goes to savings
• $0.70 goes to consumption
• $300 goes to savings
• $700 goes to consumption
MPS vs MPC
Example Scenarios
High Savers (MPS = 0.4)
Save $400 of every $1000 income increase
Moderate Savers (MPS = 0.2)
Save $200 of every $1000 income increase
Low Savers (MPS = 0.1)
Save $100 of every $1000 income increase
Key Facts
Fundamental Relationship
MPS + MPC = 1 (always)
Typical Range
MPS typically ranges from 0.1 to 0.4
Economic Impact
Higher MPS means less economic stimulus from income increases
Understanding Marginal Propensity to Save (MPS)
What is MPS?
The Marginal Propensity to Save (MPS) is the fraction of an additional dollar of disposable income that households save rather than consume. It represents how much of each extra dollar earned will be saved instead of spent.
MPS Formulas
- •From savings changes: MPS = ΔS ÷ ΔYd
- •From MPC: MPS = 1 - MPC
- •Fundamental identity: MPS + MPC = 1
Economic Significance
Multiplier Effect:
Money Multiplier = 1 ÷ MPS
Spending Multiplier = 1 ÷ MPS
Factors Affecting MPS
- Income Level: Higher incomes typically have higher MPS
- Economic Conditions: Uncertainty increases MPS
- Interest Rates: Higher rates may increase MPS
- Demographics: Age and life stage affect saving behavior
Paradox of Thrift: While individual saving is good, if everyone saves more simultaneously, it can reduce overall economic activity and income.
Real-World Applications
Fiscal Policy
Governments use MPS to predict the effectiveness of tax cuts and stimulus packages
Economic Forecasting
MPS helps predict consumption patterns and economic growth
Personal Finance
Understanding your own MPS helps with budgeting and financial planning