The marginal propensity of consume


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Marginal propensity to consume - definition

The marginal propensity to consume (mpc) is the extra consumer spending arising from an increase in national income, expressed as:


If we take the following figures for GPD and consumption we can calculate the mpc:

  2018 2019
GDP $800bn $840bn
Consumption $500bn $525bn

This gives us:

  2018 2019
GDP   + $40bn
Consumption   + $25bn

Therefore, the mpc is:

$25bn/$40bn; = 0.625

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