ECON100B_Section_0915-16 - Economics 100B Discussion Notes...

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Unformatted text preview: Economics 100B Discussion Notes Review of Consumption, Saving, Investment Part I (Lecture 09/11/08 by Professor Steven Wood) Prepared by GSI Maylin Jue ( mjue@berkeley.edu ) Section Date: 09/15/08 to 09/16/08 Savings Desired Consumption(C d ) : the consumption amount desired by households Desired Savings (S d ): the level of national saving when consumption is at its desired level S d = Y - C d G S positive when consumption < income S negative when consumption > income Tradeoff between current consumption and future consumption (more savings means more future consumption) Marginal Propensity to Consume (MPC) MPC = C / Y MPC < 1 Therefore, C < Y If Y increases by $5, C will increase by lets say $3 (point being C increases by less than $5). Theres $2 leftover which goes into Savings. When Y increases, both C and S increase. Factors that Shift the Savings Curve Right A rise in current output (Y) A fall in expected future output (Y e ) A fall in wealth (W) A fall in government purchases (G) A rise in taxes (assuming Ricardian equivalence does not hold) (T) *An increase in interest rates increases savings but does not shift savings because...
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This note was uploaded on 09/23/2008 for the course ECON 200B taught by Professor Wood during the Fall '08 term at The University of British Columbia.

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ECON100B_Section_0915-16 - Economics 100B Discussion Notes...

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