• Income, whether individual or national, must either be spent or saved.

  • The average propensity to consume is a percentage of income spent, and the average propensity to save is a percentage of income saved.
  • A higher average propensity to consume indicates more economic activity as consumers demand goods and services.
  • On the other hand, a lower average propensity signals a slowing economy as fewer goods are needed and job stability is threatened.
  • Average propensity to consume is most informative when tracked over time or compared across countries or individuals.