MPS (Marginal Propensity to Save)
Plain definition
The fraction of each additional dollar of disposable income that a household saves rather than spends on consumption.
In economics
MPS is the leakage that shrinks the multiplier: since MPC + MPS = 1, a higher MPS means less of each new dollar is respent, so the spending multiplier 1/MPS is smaller. In paradox-of-thrift scenarios, if everyone tries to raise MPS during a recession, total saving can actually fall because incomes collapse.
Example
A freelancer earns an extra 500 into savings while spending $1,500. Her MPS is 0.25 (and her MPC is 0.75). With an economy-wide MPS of 0.25, the simple spending multiplier is 1/0.25 = 4.
MPS is confused with the overall savings rate. MPS is the marginal response, how much of the NEXT dollar is saved; the savings rate is total saving divided by total income. They coincide only if the household saves the same fraction at every income level, which is rarely true.