A Simple Framework for MPCs and MPXs

September 28, 2025, Paper: "Standard consumption models assume a notional consumption flow that does not distinguish between nondurable and durable consumption. Such notional-consumption models generate notional marginal propensities to consume (MPC). By contrast, empirical work and policy discussions often highlight marginal propensities for expenditure (MPX), which incorporate spending on durables. We compare the notional consumption model to an isomorphic model with frictionless durables, and map notional MPCs into MPXs. In its minimal formulation, the mapping is: MPX = 1 + s r+δ × 1 τ MPC, with durable share s, interest rate r, durable depreciation rate δ, and time horizon τ. Our analysis can be extended to incorporate durable-adjustment frictions."