marginal propensity to save

In economics, the marginal propensity to save refers to the increase in saving (non-purchase of current goods and services) that results from an increase in income. For example, if a family earns one extra dollar, and the marginal propensity to save is 0.35, the family will spend 65 cents more, and save 35 cents more. It can also go the other way, referring to the decrease in saving that results from a decrease in income. It is crucial to Keynesian economics and is the key variable determining the value of the multiplier. It is the opposite of the marginal propensity to consume. In the example above, the marginal propensity to consume would be 0.65, or c = 1 - s The marginal propensity to save is measured as the ratio of the change in saving to the change in income.

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