Macro 6 - The Short-Run Keynesian Model(Chapter 6 7 Chapter...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
The Short-Run Keynesian Model (Chapter 6+7) Chapter 6 (Consumption and Investment) -Consumption: expenditures by households on final goods and services -Saving: part of personal disposable income that is not consumed Consumption, income, and saving -Personal saving: the part of disposable income that is not consumed; saving equals income minus consumption The Consumption Function -The consumption function shows the relationship between the level of consumption expenditures and the level of disposable personal income -The break-even point: the level of disposable income at which households just break even -When the consumptions function lives above the 45 degree line, the household is dissaving. When the consumption function lies below the 45 degree line, the household has positive saving. The Saving Function -The saving function shows the relationship between the level of saving and income The Marginal Propensity to Consume -The marginal propensity to consume (MPC) is the extra amount that people consume when they receive an extra dollar of disposable income -The slope of the consumption function, which measures the change in consumption per dollar change in disposable income, is the marginal
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Macro 6 - The Short-Run Keynesian Model(Chapter 6 7 Chapter...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online