The average propensity to save (APS) is a calculation of how much disposable income is regularly saved, based on the economic theories of John Maynard Keynes. Developing countries tend to have higher APS rates, while modern industrialized nations have lower rates. The marginal propensity to save (MPS) is closely related to APS and shows the change in percentages of saving as income increases. The average propensity to consume (APC) and the marginal propensity to consume (MPC) are also important concepts in Keynesian economics.
The average propensity to save (APS) is an economic calculation for nations or individual households of how much disposable income is regularly saved or how much of total income is saved. The principle is based on the economic theories established by John Maynard Keynes, a noted British economist of the early 20th century, whose theories, as of 2011, are still widely used by nations and businesses. As income increases, the average propensity to save percentage also tends to increase and, as income decreases, APS also falls. The reason for this given by Keynes was that the amount of income directly determined saving rates, whereas many other economists believe that the average propensity to save is more directly affected by interest rates in a country and by the rise or fall in the cost of saving. goods and services .
In developing countries with limited consumer markets and generally low incomes, the average propensity to save tends to be high. The most notable example of this is China, where the saving rate is extremely high, both nationally and domestically, with the country saving nearly 50% of its gross domestic product (GDP) income in the first decade of the 21st century. Most modern industrialized nations have a very low average propensity to save domestic rates, however, with rates in 2011 in the US of 3.6%, in the UK 5.4% and 3.2% in Japan. Several reasons affect this saving percentage, including a population’s demographics, inflation rates, and unemployment levels. Nations that are modern states still have a comparatively very high average propensity to save taxes, they include Spain with a rate of 17%, Belgium with 13.1% and France with 15.2%.
A concept closely related to the average propensity to save is the marginal propensity to save (MPS), which aims to increase income levels. As an individual’s or nation’s income increases, the marginal propensity to save also increases as a percentage of the whole. This is another key modifier in economic theories promoted by Keynes and is a ratio that shows the change in percentages of saving as the change in percentages of income increases. China is the most notable example of a high MPS rate, where it exceeded 60% growth during the first decade of the 21st century.
The other side of saving rates are two other fundamental concepts used in Keynesian economics, which are the average propensity to consume (APC) and the marginal propensity to consume (MPC). If a household’s average propensity to save from disposable income is 5.4%, as in the UK, the average UK household will have an APC of 94.6% to its disposable income. The MPC is also the inverse of the MPS and is a ratio based on the change in consumption levels as the change in disposable income occurs. Consumption rates are typically high in modern, industrialized countries, due to the proliferation of available goods and services and the consumer base of societies that encourage job growth. As income rises, there is less need to spend on more goods and services, so consumption rates generally fall as a percentage of the whole.
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