How this calculator works
The marginal propensity to save compares a change in household saving with the change in disposable income that produced it. If income rises by $1,000 and households save $200 of the increase, the marginal propensity to save is 0.2. It is the complement of the marginal propensity to consume when the extra income is split only between spending and saving. Saving here means the part of income not spent on consumer goods, which includes money left in deposit accounts as well as other financial saving.
Formula
MPS = change in consumer saving / change in disposable income. Rearranged, the saving change is MPS × income change and the income change is saving change / MPS. MPC = 1 - MPS when the two uses exhaust the extra income.
Worked example
Disposable income rising by $1,000 while saving rises by $200 gives an MPS of 0.2 and an MPC of 0.8. At an MPS of 0.3, a $600 income increase would add $180 to saving.
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Frequently asked questions
Does saving include debt repayment?
In the national accounts, saving is income not spent on consumption. Repaying debt is a financial transaction that uses existing saving; whether it changes measured saving depends on the accounting framework, so state your definition when comparing figures.
Why can MPS be negative?
Households can reduce saving when income falls, or spend more than new income by borrowing. The measured marginal propensity then falls below zero. This input is limited to the usual zero-to-one range for planning.
How is MPS used?
The reciprocal of MPS is the simple spending multiplier: with MPS of 0.2, the multiplier is 5. The marginal propensity to consume route gives the same answer when MPC = 1 - MPS.