marginal propensity to consume

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Related to marginal propensity to consume: Marginal propensity to save, Consumption function

Marginal Propensity to Consume

In Keynesian economics, the amount of a person's increase in income spent on goods and services as opposed to saved. It is measured as a ratio of a change in consumption to a change in income. For example, if one receives a $5,000 raise in salary and spends $3,000, the MPC is 0.6. Factors affecting the MPC include interest rates and the relative expense of goods and services. See also: Marginal propensity to save.

marginal propensity to consume (MPC)

the fraction of any change in NATIONAL INCOME that is spent on consumption:


References in periodicals archive ?
We highlight four areas where frameworks that do not explicitly model wealthy HtM households provide misguided intuitions about the effects of fiscal policy: the degree of nonlinearity of the marginal propensity to consume with respect to the transfer size, the asymmetry of the consumption response with respect to equal-size income windfalls and losses, the optimal phasing-out of stimulus payments with income for maximizing the impact on aggregate consumption, and the extent of cross-country dispersion in consumption responses to a fiscal transfer.
The model proposed in the paper not only confirms this proposition, but it also indicates that the marginal propensity to consume has a theoretical basis for modifying velocity, money demand and consumption.
Furthermore, because both the consumption and wealth responses to productivity disturbances are nonlinear, the measured marginal propensity to consume out of wealth is unlikely to be constant.
In other words, the marginal propensity to consume leisure out of wealth shocks is about .
We now describe our approach to estimating the marginal propensity to consume out of wealth and labor income.
The Blundell, Pistaferri, and Preston (2008) estimator of the transmission coefficient of transitory income shocks to consumption, the marginal propensity to consume (MPC), is given by
My results do indicate that the long-term marginal propensity to consume out of wealth declined somewhat during the 1990s, as suggested in Poterba (2000).
65-to-74 age group Model and category 1984 1997 Total expenditures (quarterly) 6,016 6,513 Food at home: Expenditure $813 $782 Marginal propensity to consume (1).
The marginal propensity to consume out of a deficit financed tax cut is considerably lower than the Keynesian consumption propensity proposed by Barsky, Mankiw, and Zeldes [3].
The actual surplus from which debt service payments are made is determined mainly by two factors: (i) the productivity of capital, and (ii) the marginal propensity to consume.
In addition, estimates from econometric studies suggest that in Japan the marginal propensity to consume out of wealth is relatively small.

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