Lecture 18 Notes

Lecture 18 Notes - ECN 211 Macroeconomic Principles L18:...

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10/22/09 1 ECN 211 Macroeconomic Principles L18: Analyzing Aggregate Expenditures (continued)
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Determinants of Consumption (cause shifts in the consumption function). • Wealth – Higher levels of wealth (stock variable) will cause an upwards shift in the consumption function. – Increase in “a” (vertical intercept) • Expectations – “Consumer confidence” Consumers become pessimistic therefore want to spend less Causes a decrease in “a” 10/22/09 2
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• Demographics – Population growth – Aggregating over a larger number of individuals – Causes “a” to increase – Population mix – Young households and older households tend to have a higher marginal propensity to consume. • “Middle-aged people tend to save more” • The MPC can increase 10/22/09 3 Determinants of Consumption (cause shifts in the consumption function).
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10/22/09 4 Changes in autonomous Consumption : “a” 30 Yd Consumption C 1 C 2 C 2 70 10
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10/22/09 5 Changes in the MPC 30 Yd Consumption C 1 MPC = 0.8 C 2 MPC = 0.9 C 3 MPC = 0.6
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This note was uploaded on 03/03/2010 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

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Lecture 18 Notes - ECN 211 Macroeconomic Principles L18:...

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