What is the definition of PMC and PMA in Economics and its formula for calculating it?

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In case you were wondering , what is the definition of PMC and PMA in economics and its formula for calculating it? Read on, as we'll answer these questions.

What is the definition of PMC and PMA in economics and your formula for calculating it?

PMA and PMC describe two common and "opposite" trends in how a worker typically spends his or her money. These proposals were described by John Maynard Keynes at the beginning of the XNUMXth century and have a psychological background.

Keynes believed that consumer behavior differed from existing theories (at the time) about economics. That said, psychology comes in by humanizing the changes between different salaries. Thus describing the tendency of people to spend more money to have a better income. Variants of these observations are known as PMA and PMC.

PMA (marginal propensity to save)

When the term PMA is used, we refer to the marginal propensity to save . PMA talks about the saving power that an individual gets when he receives an increase in his income. It refers to the ability to save when there is a positive change in income.

On the other hand, also in relation to saving, you may be interested in the importance of money in our environment, something with which we have contact for life.

PMC (marginal propensity to consume)

On the other hand, the PMC, also known as Marginal propensity to consumption, refers to the consuming capacity acquired after a salary increase. This refers to the ability to spend more money when there is an increase in a person's income. Denoting this common trend among workers on a general level

In summary, we can classify PMA as the saving capacity that is acquired with a salary increase. While PMC is the spending power acquired after an increase in income.

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In addition to the above, it is worth looking for extra earning methods. therefore, we recommend that you know about international banking and its advantages.

Calculation of the PMC

As we have indicated above, the PMC considers the expenses incurred by a person for acquiring products or for paying for various services using the additional income. This calculation is done analyzing expenses in relation to additional income and a simple mathematical operation is performed to determine the PMC value.

To contextualize, it is better to establish an example with which we will extract the PMC. It is very simple, we will divide between the new additional income and the expenditure made. For example, if a person receives a extra income of $ 100 and ends up spending $ 50 , the MPC is determined equal to 0,50 . The only thing you do is divide the extra income by the expense, so you get the PMC.

If the salary is variable, the PMC should also vary. What a user must avoid at all costs is that his PMC increases as his salary increases. This trend shows that accounts are not being managed properly and that a change needs to be made.

On the other hand, as we pointed out earlier, a smart option is to learn how to manage your assets, so learn the relationship between the interest rate and inflation.

Calculation of the PMA

PMA, as we have pointed out, refers to the savings a person can make by receiving extra income. Of course, the way to calculate the marginal propensity to save it is the same as the PMC. That is, by making a small division, the result can be achieved very easily.

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Once again we will exemplify a concrete case. On this occasion, imagine that a person receives an extra $ 100 income and ends up saving $ 60 of that amount. In the previous case we can determine that the PMA is 0.60, a high PMA, something positive.

Having a high MAP in relation to extra income means that you are saving more money . Generally speaking, it is determined that you should look for a high EMP if you want to save money.

Also to save money, it is worth considering some applications to save on the electricity bill. Certainly all these measures contribute to having a good MAP.

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