A Deeper Look at Consumption Determinant An increase leads to A decrease leads

A deeper look at consumption determinant an increase

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What determines your level of consumption? A Deeper Look at Consumption Determinant An increase leads to… A decrease leads to… Correlation (+ or -) Shift or movement along Current disposable income (Y-T) Increases Decreases + Movement along Household wealth (w) Increases Decreases + Shift Consumption: Notes from class Lesson 8 Page 56
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wealth (w) Expected future income (Y) Increases Decreases + Shift Price Level (P) Decrease Increase - Shift Real interest rate (r) Decrease Increase - Shift Consumption function: shows relationship between consumption spending and disposable income Consumption Function: Expectations of Future profits (animal sprits) Cash flow Taxes on business The real interest rate What determines firms' level of investment? Investment: Determinant An increase leads to…. A decrease leads to… Correlation (+ or -) Shift or movement along Expectations of future profits Increase Decrease + Cash flow Increase Decrease + Taxes on business (T) Decrease Increase - The real interest rate (r) Decrease Increase - Price level in US relative to other countries (P US ) Growth rate in US relative to other countries (G US ) Strength of dollar relative to other countries ($) What determines countries' level of Net Exports? Net Exports: Determinant An increase leads to…. A decrease leads to… Correlation (+ or -) Shift or movement along P US decrease increase - G decrease Increase - Lesson 8 Page 57
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