Marginal propensity to save is used in Keynesian macroeconomics to quantify the relationship between changes in income and changes in savings. It refers to the proportion of a raise in pay that a consumer saves rather than uses for consuming goods and services.

### How Marginal Propensity to Save Is Calculated

The marginal propensity to save is calculated by dividing the change in savings by the change in income.

If income changes by a dollar, then saving changes by the value of the marginal propensity to save. The marginal propensity to save is actually a measure of the slope of the savings line, which is created by plotting the change in income on the horizontal x-axis and change in savings on the vertical y-axis. The slope of the savings line is depicted by the change in saving and the change in income, or a change in the y axis, divided by the change in the x axis.

The value of the marginal propensity to save always varies between zero and one.

For example, assume an engineer has a \$100,000 change in income from the previous year due to a pay raise and bonus. The engineer decides that he or she wants to spend \$50,000 of the increase in income on a new car and save the remaining \$50,000. The resulting marginal propensity to save is 0.5, which is calculated by dividing the \$50,000 change in savings by the \$100,000 change in income. Therefore, for each additional \$1 of income, the engineer's savings account increases by 50 cents.