Marginal Propensity to Save | Vibepedia

The marginal propensity to save (MPS) is a fundamental concept in economics that measures the proportion of an increase in income that is saved rather than spent. It is a crucial component in understanding the behavior of consumers and the overall economy. The MPS is closely related to the marginal propensity to consume (MPC), which measures the proportion of an increase in income that is spent. According to John Maynard Keynes, the MPS is a key factor in determining the multiplier effect of an increase in aggregate demand. For instance, if the MPS is high, it means that consumers tend to save a large portion of their income, which can lead to a decrease in aggregate demand and economic growth, as discussed in the context of the Keynesian Cross model.