The marginal propensity to consume (MPC) measures the proportion of extra income that is spent on consumption. It measures the change in consumption/change in disposable income. MPC=
ΔC
ΔY
The multiplier effect states that an injection into the circular flow (e.g. government spending or investment) can lead to a bigger final increase in real GDP. This is because the initial injection leads to knock on effects and further rounds of spending.The marginal propensity to consume will determine the size of the multiplier. The higher the MPC, the greater the multiplier effect will be. If the marginal propensity to consume is 0, there will be no multiplier effect. Multiplier (K) =