Marginal Propensity to Save (MPS)

Definition

Marginal propensity to save (MPS) represents the proportion of each additional dollar earned that individuals choose to save rather than spend on consumption.

Related terms

Marginal Propensity to Consume (MPC): The proportion of each additional dollar earned that individuals choose to spend on consumption rather than save.

Disposable Income: The amount of income available for spending or saving after taxes have been deducted.

Paradox of Thrift: The idea that an increase in saving by individuals can lead to a decrease in overall economic output and income.