Economic Definition of MPC. Defined.
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Term MPC Definition: The abbreviation for marginal propensity to consume, which is the proportion of each additional dollar of household income that is used for consumption expenditures. Or alternatively, this is the change in consumption expenditures due to a change in disposable income. The marginal propensity to consume is the slope of the consumption or propensity-to-consume line that forms the foundation for Keynesian economics. As such, it also takes center stage for the slope of the aggregate expenditure line and the multiplier effect. The sum of the marginal propensity to consume and the related concept, the marginal propensity to save, is equal to one.