1. What is Marginal Propensity to Save?

The Marginal Propensity to Save (MPS) is the proportion of an aggregate raise in income that a consumer saves rather than spends on consumption. It is the complement to the Marginal Propensity to Consume (MPC).

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( MPS \) — Marginal Propensity to Save (decimal)
• \( MPC \) — Marginal Propensity to Consume (decimal, between 0 and 1)

Explanation: Since income is either consumed or saved, the sum of MPC and MPS must equal 1.

3. Importance of MPS Calculation

Details: MPS is crucial in Keynesian economics for determining the multiplier effect and understanding how changes in income affect saving behavior in an economy.

4. Using the Calculator

Tips: Enter the Marginal Propensity to Consume (MPC) as a decimal between 0 and 1. For example, if MPC is 80%, enter 0.8.

5. Frequently Asked Questions (FAQ)

Q1: What is the relationship between MPS and MPC?
A: They are complementary concepts that always sum to 1 (MPS + MPC = 1).

Q2: What are typical values for MPS?
A: In most economies, MPS ranges between 0.1 and 0.4, meaning people save 10-40% of additional income.

Q3: How does MPS affect the multiplier effect?
A: Higher MPS means a smaller multiplier effect, as more income is saved rather than spent and recirculated in the economy.

Q4: Can MPS be negative?
A: Normally no, as it would imply saving more than 100% of additional income or dissaving, which is unusual for marginal changes.

Q5: How does MPS differ across income levels?
A: Generally, higher-income individuals have higher MPS as they can afford to save more of their marginal income.