Keynesian Model: Consumption #1

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4 Terms

1
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Consumption — Determinants

  • income

  • taxes

  • expectations

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People either…

spend or save — (savings: what is not spent or taxed)

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Marginal Propensity Consume/Save — (MPC/MPS)

  • mpc + mps = 1

— FORMULA: C (cons.) = mpc (Y (income) - T (taxes))

4
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EXAMPLE VISUAL

C = 0.8 (Y - 50)

<p>C = 0.8 (Y - 50)</p>