chap 22

chap 22 - A. Consumption and Saving Biggest consumption in

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A. Consumption and Saving Biggest consumption in transportation/health care a. Consumption, Income, and Saving i. Personal saving = disposable income not consumed (personal saving rate) ii. Break-even point = where households consume all income 1. Intersection of 45° line and consumption function 2. difference btwn 45° line and consumption function = saving when consumption function is below iii. Consumption function shows relationship btwn consumption expenditure and level of DI iv. Saving function relationship btwn level of saving and income v. Marginal propensity to consume (MPC) = extra amt people consume when receive extra $1 of disposable income 1. it is the slope of the consumption function vi. Marginal propensity to save (MPS) = fraction of extra $1 going to extra savings 1. MPS + MPC = 1 b. National Consumption i. Current level of DI central factor determining nation’s consumption ii. Permanent income trend level of income after removing temp influences (weather/windfalls)
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This note was uploaded on 04/13/2008 for the course ECON 132 taught by Professor Rado during the Spring '08 term at BC.

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chap 22 - A. Consumption and Saving Biggest consumption in

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