Comprehensive Calculator Guide
This calculator works out your average propensity to consume (APC), the share of income you spend, and the average propensity to save. Add a second period and it gives the marginal propensity to consume: how much of each extra riyal you spend. Income of SAR 10,000 and spending of 8,000 is an APC of 0.8, saving 20%; if income rises to 12,000 and spending to 9,500, the MPC is 0.75.
Average, marginal and the multiplier
APC = spending ÷ income; APS = 1 − APC. MPC = change in spending ÷ change in income. Keynes observed that spending rises with income but by less, so saving rises.
In macroeconomics the multiplier = 1 ÷ (1 − MPC): at an MPC of 0.75 it is 4. For a household budget, an MPC near 1 means every raise is spent.
How to Use
- Enter income and spending for one period.
- Add a second period for the MPC and multiplier (optional).
- Press “Calculate” to see your spending and saving shares and the MPC.
Formula Used
APC = spending ÷ income | MPC = Δspending ÷ Δincome | Multiplier = 1 ÷ (1 − MPC)
Practical Examples
- Example 1: after a raise
- SAR 10,000 income, 8,000 spending: APC 0.8, saving 2,000. Then 12,000 and 9,500: MPC 1,500 ÷ 2,000 = 0.75, multiplier 4.
- Example 2
- SAR 15,000 income, 12,750 spending: APC 0.85, saving 2,250 (15%).
Important Tips
- Decide what share of any raise to save before it arrives.
- Use your bank statement, not a guess.
- Compare year on year.
Common Mistakes to Avoid
- Working out MPC from a single period.
- Confusing APC with MPC.
- Leaving out yearly costs such as school fees and travel.
Frequently Asked Questions
- APC vs MPC?
- APC is the share of all income spent; MPC is the share of extra income spent.
- Can APC exceed 1?
- Yes, when you spend more than you earn by drawing on savings or borrowing.
- How does MPC relate to the multiplier?
- Multiplier = 1 ÷ (1 − MPC).