MPC Calculator (marginal propensity to consume & spending multiplier)

Understanding the marginal propensity to consume (MPC) calculator — concept and principle

The marginal propensity to consume (MPC) is the share of an extra unit of disposable income that a household or economy spends. This calculator finds MPC from two income and consumption points and derives the marginal propensity to save and the simple spending multiplier.

70 cents of each extra dollar is spent and 30 cents saved, so the simple spending multiplier is about 3.33.

How it is calculated

MPC = ΔC ÷ ΔYd, the change in consumption divided by the change in disposable income.
MPS = 1 − MPC, because every extra unit is either spent or saved.
Simple spending multiplier = 1 ÷ (1 − MPC) = 1 ÷ MPS (shown when MPC is between 0 and 1).
Average propensity to consume APC = C ÷ Y, before and after, for comparison.

The principle

Keynes argued that when income rises, consumption rises too, but by less than income. MPC captures that fraction. In the simple expenditure model, an extra unit of spending becomes someone else's income; they spend MPC of it, which becomes income again, and so on. The total is a geometric series 1 + MPC + MPC² + … = 1 ÷ (1 − MPC). With taxes and imports, more leaks out each round and the multiplier is smaller: 1 ÷ (1 − [MPC × (1 − t) − MPI]).

Worked example

Default inputs: income 50,000 → 55,000 USD; consumption 42,000 → 45,500 USD.

ΔC = 45,500 − 42,000 = 3,500 USD; ΔY = 5,000 USD.
MPC = 3,500 ÷ 5,000 = 0.7.
MPS = 1 − 0.7 = 0.3.
Multiplier = 1 ÷ 0.3 ≈ 3.33.
APC before = 42,000 ÷ 50,000 = 0.84; after = 45,500 ÷ 55,000 ≈ 0.827.

Each point is the calculator re-run with only “Consumption after” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Consumption after	Marginal propensity to consume (MPC)
11,375	-6.125
22,750	-3.85
34,125	-1.575
45,500	0.7
56,875	2.975
68,250	5.25
91,000	9.8

How to read the result

An MPC close to 1 means almost all extra income is spent; low-income households tend to have higher MPCs than high-income ones. APC falling while income rises is consistent with MPC below APC. Real multipliers are much smaller than the simple 1 ÷ MPS because of taxes, imports and monetary policy responses.

Common mistakes

Using total income instead of disposable (after-tax) income.
Confusing MPC with APC.
Reading the simple multiplier as a forecast of the effect of a stimulus.
Using data from two very different periods, where prices or tastes changed.

Keep in mind: The simple expenditure model leaves out taxes, imports, prices and interest rates. Results are for learning, not forecasts or advice.

Frequently asked questions

What does an MPC of 0.7 mean?

Out of each extra 1 USD of disposable income, 70 cents is spent and 30 cents saved.

Can MPC be greater than 1?

For a household over a short period it can, for example when spending rises with borrowing, but the simple multiplier formula then does not apply.

Why do low-income households have a higher MPC?

They are more likely to spend extra income on immediate needs rather than save it.

Sources: Keynes, J. M. (1936). The General Theory of Employment, Interest and Money, Book III · Mankiw, N. G., Macroeconomics (consumption function, Keynesian cross)

Checked 9 Nov 2026. OpenStax, “Principles of Economics”, 3rd ed. (2022), Appendix D “The Expenditure-Output Model” (MPC, MPS, MPC + MPS = 1, multiplier with taxes and imports); BYU–Idaho ECON 151 Lesson 6 (MPC = ΔC ÷ ΔYd).

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