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The marginal propensity to consume (MPC) is the fractional part of a one dollar increase in income that will go towards consumption spending.

For example, if income increases from $30,000 per year to $35,000 per year, and consumption spending increases from $28,000 per year to $32,000 per year, the marginal propensity to consume is ($32000-$28000)/($35000-$30000)=$4000/$5000=4/5=.8

The marginal propensity to consume and its related concept, marginal propensity to save (MPS), are key concepts behind the multiplier effect. The sum of the MPC and MPS must equal 1.

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