Lower-income households usually have a higher MPC because they spend more of any extra income. A higher MPC means fiscal stimulus has a larger multiplier effect.
How to use the MPC Calculator – Marginal Propensity to Consume
- Change in consumption
- Change in disposable income
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the change in consumption and the change in disposable income.
Tips
- Use real (inflation-adjusted) figures to compare across years.
- Check whether data are seasonally adjusted.
- Use the same currency and base year throughout.
- Economic models simplify reality – treat results as illustrations, not forecasts.
Common mistakes to avoid
- Mixing nominal and real values.
- Comparing percentage changes with percentage-point changes.
- Treating correlations as causes.
Inputs explained
| Field | What to enter |
|---|---|
| Change in consumption | Amount in your currency |
| Change in disposable income | Amount in your currency |
What each result means
- Marginal propensity to consume = [Change in consumption]÷[Change in disposable income]
- Marginal propensity to save = 1 – [Change in consumption]÷[Change in disposable income]
- Spending multiplier = 1÷(1 – [Marginal propensity to consume])
Example values
How the main result changes when Change in consumption changes and everything else stays at the example values above:
| Change in consumption | Marginal propensity to consume |
|---|---|
| 400 | 0.4 |
| 600 | 0.6 |
| 800 | 0.8 |
| 1,000 | 1 |
| 1,200 | 1.2 |
| 1,600 | 1.6 |
Formula
MPC = change in consumption ÷ change in incomeMPS = 1 − MPCSpending multiplier = 1 ÷ (1 − MPC)Worked example
Inputs — Change in consumption: $800; Change in disposable income: $1,000.
Results — Marginal propensity to consume = 0.8; Marginal propensity to save = 0.2; Spending multiplier = 5.
Frequently asked questions
What is MPC?
The fraction of additional income spent on consumption.
What is the relationship between MPC and MPS?
They add up to 1.
How does MPC affect the multiplier?
Multiplier = 1 ÷ (1 − MPC).
What formula does the MPC Calculator – Marginal Propensity to Consume use?
MPC = change in consumption ÷ change in income.