u3 m16

Marginal propensity to consume or MPC is the increase in consumer spending when disposable income rises by $1

Marginal Propensity to Save (MPS): How much people save rather than consume when there is a change in income

MPS = 1 - MPC

Total change in GDP = multiplier * initial change in spending

Spending Multiplier = 1/MPS or 1/(1-MPC)