MPS Calculator

What is the marginal propensity to save (MPS)?

The marginal propensity to save (MPS) measures what fraction of an additional dollar of disposable income a household saves rather than spends. MPS complements the marginal propensity to consume (MPC) and appears in savings models, fiscal policy analysis, and macroeconomic forecasting. All math runs in your browser.

Because MPC and MPS sum to 1, knowing one immediately gives you the other. For consumption-focused analysis, use the MPC calculator or the marginal propensity to save calculatorwith before-and-after income levels. To see how much income remains after taxes, try the disposable income calculator.

MPS formula

MPS is the ratio of the change in savings to the change in disposable income:

Where ΔS is the change in savings and Y_d is disposable income. The marginal propensity to consume is the complement:

The spending multiplier depends on MPC, which in turn depends on MPS:

Worked example

Suppose disposable income rises by $1,000 and household savings increase by $200.

• MPS = $200 / $1,000 = 0.2000
• MPC = 1 − 0.20 = 0.8000
• Spending multiplier = 1 / 0.20 = 5.00x
• Implied spending increase = $1,000 − $200 = $800 (80% of the income gain)

An MPS of 0.20 means households save 20 cents of each additional dollar. Higher MPS values indicate more cautious saving behavior and a smaller short-run spending multiplier.

MPS vs average savings rate

MPS measures the response to a marginal (incremental) change in income, not the average share of total income saved. A household might save 10% of total income on average but have an MPS of 30% on a bonus because windfall income is more likely to be saved than regular paychecks.

Policy analysts watch MPS when evaluating stimulus effectiveness. If MPS is high, tax rebates or transfer payments produce less immediate consumption and a weaker fiscal multiplier. If MPS is low, more of each dollar circulates through the economy quickly.

Factors that influence MPS

• Income level: Higher-income households often save a larger share of marginal income.
• Permanence of income: Temporary windfalls tend to be saved; permanent raises are more likely to raise spending.
• Interest rates: Higher returns on savings can increase MPS by making saving more attractive.
• Economic uncertainty: Recessions and job insecurity often push MPS higher as households build buffers.

Frequently asked questions