1. What is the MPS Calculator?

Definition: The MPS Calculator determines the marginal propensity to save (MPS), which measures the proportion of additional disposable income that households save.

Purpose: Helps economists and policymakers analyze savings behavior and its impact on economic models.

2. How Does the Calculator Work?

The calculator computes the MPS using the following formula and steps:

Formula:

Where:

• \( \Delta s \): Increase in consumer savings (dollars)
• \( \Delta y_d \): Increase in disposable income (dollars)

Steps:

• Step 1: Input Increase in Disposable Income. Enter the change in disposable income.
• Step 2: Input Increase in Consumer Savings. Enter the change in savings due to the income increase.
• Step 3: Calculate MPS. Divide the increase in consumer savings by the increase in disposable income.

3. Importance of MPS Calculation

Calculating the MPS is crucial for:

• Economic Modeling: Determines the multiplier effect alongside MPC.
• Savings Analysis: Assesses how income changes affect savings rates.
• Policy Planning: Guides fiscal policies to influence saving behavior.

4. Using the Calculator

Example: Increase in disposable income = $1,000, Increase in consumer savings = $300:

• Step 1: Increase in disposable income = $1,000.
• Step 2: Increase in consumer savings = $300.
• Step 3: \( \text{MPS} = \frac{300}{1,000} = 0.3 \).
• Result: MPS = 0.3.

This indicates that 30% of the additional income is saved.

5. Frequently Asked Questions (FAQ)

Q: What is the marginal propensity to save?
A: MPS is the proportion of additional disposable income that households save rather than spend.

Q: How is MPS related to MPC?
A: MPS and MPC sum to 1, as all additional income is either spent or saved.

Q: What does an MPS of 0.3 mean?
A: It means 30% of an income increase is saved, with the remaining 70% consumed.

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