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Economics 012-2-26-2008

Economics 012-2-26-2008 - -In the US households do not save...

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Economics 012 2/26/2008 - Investment=Sprivate+ ((T+G)/Sgovernment) - Savings= income-consumption o Keynsianism - Consumption function o As income goes up, consumption functions go up but not proportionally o Dissavings becomes 0 savings as income initially rises Breaking point/break even o Cultural differences Works better in Asia - C=Y 45 degree line o Splits the quadrant so the horizontal line= the vertical line - C= a + by - B= the % of extra income that is spent on extra consumption
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Unformatted text preview: -In the US, households do not save their money-Current disposable income is an important factor of consumption but it is not the only one-Milton Freeman’s permanent income theory: o Transitory income vs. permanent income o Actions/incomes that change the standards of living and consumption o Relative income= your income relative to your friends, coworkers, peers, etc...
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