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What is marginal propensity?
The marginal propensity to save (MPS) is the percentage of extra revenue individuals keep rather than spend on products and services. The MPS is calculated by multiplying the change in each level of saving by the change in each level of income.
The marginal propensity is a ratio that compares how much extra spending an individual will do in response to an increase in their disposable income.
The Marginal propensity is the degree to which an individual's consumption of one good changes when income changes. The effect is often measured in percentage points indicating the proportion of extra consumption that comes out of the household budget, or in fractions that show how much income must be gained to increase consumption by one unit.
Marginal propensity refers to the proportion of additional income that an individual or economy spends or saves. It is divided into two key concepts: marginal propensity to consume (MPC) and marginal propensity to save (MPS).

MPC measures how much of an extra dollar of income is spent on consumption. For example, if MPC is 0.8, it means 80% of additional income is spent.
MPS represents the fraction of extra income saved. If MPS is 0.2, it means 20% of additional income is saved.

MPC and MPS always sum to 1. These concepts are crucial in economics as they influence economic growth, investment, and fiscal policies. Higher MPC leads to stronger economic activity, while higher MPS supports long-term capital accumulation.

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