MARGINAL PROPENSITY TO CONSUME (MPC)

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• Is always less than 1

• If a consumer receives a dollar of income, consumer will spend some of it and save the rest

• The fraction that the consumer spends is determined by the MPC

• The fraction of income that the consumer saves is determined by the marginal propensity to save (MPS)

• The sum of the MPC and MPS is always 1

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