What are the other variables that also influence Consumption?
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Household Wealth (W), Expected Future Income, and Interest Rate.
Review Question #4:
Suppose disposable income increased by $150 million. If the MPC is 0.8, the change
in consumption is ____ and the change in saving is ____.
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Change in Consumption = Change in Disposable Income x MPC
120 = 150 x 0.8
, Δ consumption + Δ saving = Δ disposable income
120 +? = 150
Δ saving = 30
Review Question #3:
Between 2018 and 2019, consumption spending increased by $500 billion, while
disposable income increased by $600 billion.
What is the marginal propensity to consume, MPC ?
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△C / △YD = $500 / $600 Billion = 0.83
Make sure to divide the CHANGE, use the difference to get the MPC.
Expected Future Income
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As it increases, the consumption function shifts upward.
As it decreases, the consumption function shifts downward.
Shifts of SRAS
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Household Wealth (W), Expected Future Income, and Interest Rate.
Review Question #4:
Suppose disposable income increased by $150 million. If the MPC is 0.8, the change
in consumption is ____ and the change in saving is ____.
Give this one a try later!
Change in Consumption = Change in Disposable Income x MPC
120 = 150 x 0.8
, Δ consumption + Δ saving = Δ disposable income
120 +? = 150
Δ saving = 30
Review Question #3:
Between 2018 and 2019, consumption spending increased by $500 billion, while
disposable income increased by $600 billion.
What is the marginal propensity to consume, MPC ?
Give this one a try later!
△C / △YD = $500 / $600 Billion = 0.83
Make sure to divide the CHANGE, use the difference to get the MPC.
Expected Future Income
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As it increases, the consumption function shifts upward.
As it decreases, the consumption function shifts downward.
Shifts of SRAS
Give this one a try later!
