Marginal propensity to consume (MPC) is an economic metric measuring the share of an additional dollar of disposable income that a household spends on consumption rather than saves.
MPC quantifies induced consumption — the principle that consumer spending rises as disposable income rises. If a household earns one extra dollar of disposable income and its MPC is 0.65, it will spend 65 cents of that dollar and save the remaining 35 cents. This makes MPC central to Keynesian analyses of the spending multiplier: a higher aggregate MPC means a given injection of income, whether from stimulus spending, tax cuts, or wage increases, generates more subsequent rounds of spending as it circulates through the economy.
MPC is closely related to marginal propensity to save (MPS) — the two sum to 1, since income that is not spent is by definition saved. Because higher-income households tend to spend a smaller share of additional income than lower-income households, MPC is frequently cited in debates over which forms of fiscal stimulus generate the largest near-term boost to aggregate demand.