what is marginal propensity to save mps 
in keynesian economics theory marginal propensity to save mps refers to the proportion of an aggregate raise in income that a consumer saves rather than spends on the consumption of goods and services put differently mps is the proportion of each added dollar of income that is saved rather than spent mps is a component of keynesian macroeconomics theory and is calculated as the change in savings divided by the change in income 1mps is depicted by a savings line a sloped line created by plotting change in savings on the vertical y axis and change in income on the horizontal x axis d3sign getty imagesexample of marginal propensity to save mps suppose you receive a 500 bonus with your paycheck you suddenly have 500 more in income than you did before if you decide to spend 400 of this marginal increase on a new business suit and save the remaining 100 your marginal propensity to save is 0 2 this is calculated by dividing the 100 change in saving by the 500 change in income understanding marginal propensity to save mps given data on household income and household savings economists can calculate households mps by income level this calculation is important because mps is not constant it can vary by income level typically the higher the income the higher the mps because as wealth increases so does the ability to satisfy needs and wants thus each additional dollar is less likely to go toward additional spending however the possibility remains that a consumer might alter savings and consumption habits with an increase in pay naturally with an increase in salary comes the ability to cover household expenses more easily allowing for more leeway to save a higher salary also brings access to goods and services that require greater expenditures this may include the procurement of higher end or luxury vehicles or relocation to a new pricier residence if economists know what consumers mps is they can determine how increases in government spending or investment spending will influence saving mps is used to calculate the expenditures multiplier using the following formula the expenditures multiplier tells us how changes in consumers mps influences the rest of the economy the smaller the mps the larger the multiplier and the more economic impact that a change in government spending or investment will have the marginal propensity to consume mpc is the complement to mps added together they should always equal one marginal propensity to consume mpc the other side of mps is marginal propensity to consume mpc which shows how much a change in income affects purchasing levels using the above example where you spent 400 of your 500 bonus the mpc is 0 8 this is calculated by dividing 400 by 500 if you add mpc and mps the result should always equal one making mpc the complement to mps 