What does 'mpc' represent in the Keynesian equation for aggregate private sector demand?

The term 'mpc' in the Keynesian equation for aggregate private sector demand stands for Marginal Propensity to Consume. This concept is critical in understanding consumer behavior and spending patterns within an economy. The marginal propensity to consume measures the proportion of additional income that a household will spend on consumption as opposed to saving.

In the context of the Keynesian framework, the marginal propensity to consume plays a pivotal role in determining the overall aggregate demand. An increased mpc indicates that consumers are likely to spend more of any additional income, thereby stimulating economic activity. Conversely, a lower mpc suggests a tendency to save more, which can dampen demand and economic growth.

Understanding mpc is essential for policymakers and economists as it helps predict the effectiveness of fiscal stimulus measures. For example, if a government provides tax cuts or direct payments, knowing the mpc can help estimate how much of that money will be spent immediately and how much might be saved, impacting the overall economy's recovery and growth trajectory.

The other options do not align with economic terminology related to the Keynesian model. They refer to concepts that are not used to describe consumer behavior or aggregate demand in this context.