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Unformatted text preview: Fiscal Policy taxes & government spending MPC = 1 means that everyone would spend all of their extra money It is not highly likely that MPC would equal zero MPC is in between 0 and 1. Last 40 years it has been inbetween .6 - .8 APS = 1 MPS WRONG ON SLIDES The Keynesian Model manages demand. Exogenous independent of disposable income. Consumption Function is a mathematical function. 1. autonomous no matter what happens to income there is a certain amount you will spend a. Income what you earn b. Transfer Payment take money from someone else and spend it Y = f (x) C = f (y D ) Slope = change in y change in x y = a + bx when x = 0 spend c = a + by D AUTONOMOUS CONSUMPTION Slope = Change in C Change in Y...
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This note was uploaded on 04/18/2008 for the course ECON 202 taught by Professor Woroby during the Spring '08 term at Towson.
- Spring '08