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Lecture06 - Announcements Readings this week House ch 6 7 8...

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1 Announcements Readings this week House, ch 6, 7, 8 Mankiw, ch 3, 18 Problem sets PS #3 due now No PS this week – Instead, practice Midterm Ungraded , but strongly advised Consumption Function: What determines Aggregate Consumption ( C )? Individual c depends on individual wealth and r. • Aggregate C should be determined by aggregate W . Consumption Function: ( , ) C C W r + - Consumption: Increasing function of wealth ( W ) = financial assets + PDV labor income Decreasing function of real interest rate ( r )
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