The marginal propensity to consume (mpc) is the extra consumer spending arising from an increase in national income, expressed as:
| ∆C |
| ∆Y |
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
How the mpc is connected to the multiplier
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