Marginal Propensity to Consume (MPC)
What is Marginal Propensity to Consume?
The share of an extra dollar of income that a household spends.
Understanding Marginal Propensity to Consume
If you receive an extra $100 and spend $80, your MPC is 0.8; the remaining 0.2 is your marginal propensity to save.
MPC is usually higher for lower-income and cash-constrained households, which is why the design of stimulus payments affects how much they boost spending.