Each round spends the MPC share of the round before; the cumulative total approaches 100 ÷ (1 − MPC).
Round
New spending
Cumulative
Share of the eventual total
1
$100.00
$100.00
32.0%
2
$68.00
$168.00
53.8%
3
$46.24
$214.24
68.6%
4
$31.44
$245.68
78.6%
5
$21.38
$267.06
85.5%
6
$14.54
$281.60
90.1%
7
$9.89
$291.49
93.3%
8
$6.72
$298.21
95.4%
All rounds
$312.50
100%
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What it calculates: Marginal propensity to consume (MPC), Marginal propensity to save (MPS), Spending multiplier, Tax multiplier.
Updated 22 September 2026 · Transparent assumptions
Income up $10,000, spending up $6,800: an MPC of 0.68
The marginal propensity to consume is the share of an extra dollar of income that is spent. It is a ratio of changes, not of levels: the change in consumption divided by the change in income. A household whose income rises from $40,000 to $50,000 and whose spending rises from $35,200 to $42,000 has an MPC of 6,800 ÷ 10,000 = 0.68.
MPC = ΔC ÷ ΔY
On a graph of consumption against income the MPC is the slope of the line joining the two points. Keynes’s “fundamental psychological law” was that this slope lies between 0 and 1 — people spend part of a raise and save the rest — and the whole expenditure multiplier rests on that one number.
Worked example
ΔC = 42,000 − 35,200 = 6,800
ΔY = 50,000 − 40,000 = 10,000
MPC = 6,800 ÷ 10,000
MPC = 0.68
The 32 cents not spent is the MPS, so MPC + MPS = 1
An extra dollar of disposable income is either spent or saved, so the marginal propensities add to one exactly as the average ones do. An MPC of 0.68 means an MPS of 0.32. In the household above, saving rose from $4,800 to $8,000 — a change of $3,200 on $10,000 of extra income.
MPC + MPS = 1
The average propensities tell a different story from the same data: the APC was 0.88 before the raise and 0.84 after. The APC fell because the household spent less than its average share of the raise, which is exactly what an MPC below the APC means.
An MPC of 0.68 turns $100 of new spending into $312.50 of output
When one person spends an extra dollar it becomes someone else’s income, and they spend the MPC share of it, and so on. The rounds form a geometric series — 1 + 0.68 + 0.68² + … — whose sum is 1 ÷ (1 − 0.68) = 3.125. That is the spending multiplier: $100 of new government purchases or investment raises output by $312.50 in the simplest model.
k = 1 ÷ (1 − MPC); k_T = −MPC ÷ (1 − MPC)
A tax cut works one step later. It adds to disposable income, of which only the MPC share is spent in the first round, so its multiplier is −MPC ÷ (1 − MPC) = −2.125: a $100 tax cut raises output by $212.50, and a $100 tax rise lowers it by the same. The table on this page follows a $100 injection round by round at your MPC.
Multipliers at MPC = 0.68
k = 1 ÷ (1 − 0.68) = 3.125
k_T = −0.68 ÷ 0.32 = −2.125
$100 of spending → $312.50 of output
Households spent 12–30% of the 2008 stimulus payments on non-durables within three months
Measured MPCs depend heavily on what kind of income changes. Parker, Souleles, Johnson and McClelland used the randomised timing of the 2008 US economic stimulus payments to estimate that households spent about 12–30% of the payment on non-durable goods in the three months it arrived, and roughly 50–90% once durable purchases, mainly vehicles, are counted.
Liquidity is the main divider. Households with little cash or credit spend a much larger share of a windfall than households with savings to fall back on, which is why the same stimulus produces different multipliers depending on who receives it.
A raise is spent more readily than a one-off bonus of the same size
Milton Friedman’s permanent-income hypothesis says households base spending on the income they expect over the long run. A permanent raise changes that expectation and is largely spent; a one-off bonus hardly changes it and is largely saved. The MPC measured from a temporary change is therefore lower than the MPC measured from a permanent one, even for the same household.
That is why two observations should be chosen with care. If the second year’s income was lifted by a one-off payment, the MPC computed here describes the response to a windfall, not to a lasting change in income.
An MPC above 1 or below 0 usually means something other than income moved
Within Keynes’s model the MPC lies between 0 and 1. Measured values outside that range are common in household data and nearly always mean the two observations differ in more than income: a car bought in the second year, a change in interest rates, a move, or an income fall that the household did not cut spending to match.
At an MPC of 1 or more the multiplier formula breaks — the series never converges — and the calculator reports that no finite multiplier exists rather than printing a meaningless number.
Frequently Asked Questions
How do you calculate the marginal propensity to consume?
Divide the change in consumption by the change in income between two periods: MPC = ΔC ÷ ΔY. If income rises by $10,000 and consumption by $6,800, the MPC is 0.68.
How is the MPC related to the multiplier?
The simple spending multiplier is 1 ÷ (1 − MPC), and the simple tax multiplier is −MPC ÷ (1 − MPC). An MPC of 0.8 gives a spending multiplier of 5 and a tax multiplier of −4.
What is the difference between the MPC and the APC?
The MPC is the share of an extra dollar spent (ΔC ÷ ΔY); the APC is the share of total income spent (C ÷ Y). When some spending does not depend on income, the APC is higher than the MPC.
Can the MPC be greater than 1?
In measured data, yes — usually because something besides income changed, such as a large purchase or borrowing. In the Keynesian model it lies between 0 and 1, and at 1 or above the multiplier has no finite value.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Results are estimates for planning and analysis based on the figures you enter. They are not accounting, tax, or financial advice — verify with your own records and a qualified professional before making decisions.
Sudha, J. (2026, September 22). Marginal Propensity to Consume Calculator. Calculator Matters. https://calculatormatters.com/economics/marginal-propensity-to-consume-calculator/
APC vs MPC: The Average and the Marginal Propensity to Consume
APC: the share of all income spent. MPC: the share of an extra dollar spent. Worked through one household, with APS, MPS and why only MPC sets the multiplier.