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Saving, Investment, and the Financial System N.Gregory Mankiw Principles of Economics Eighth Edition CA$36.10
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Saving, Investment, and the Financial System N.Gregory Mankiw Principles of Economics Eighth Edition
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The Consumption Sector and Saving Function Consumption and Disposable Income, Average Propensity to Consume (APC/The Percent of DI Spent), APCs Greater than One, Marginal Propensity to Consume (MPC), Autonomous Consumption versus Induced Consumption, Determinants of the Level of Consu...

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  • January 6, 2023
  • 30
  • 2022/2023
  • Exam (elaborations)
  • Questions & answers

Subjects

  • consumption
  • consumption and saving
  • sav
  • consumption and disposable income
  • average propensity to consume apcthe percent of di spent
  • the determinants of saving
  • determinants of the level of consumption

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The Consumption Sector

,Consumption
Consumption is the nation’s expenditures
on all final goods and services produced
during the year at market prices
GDP=C+I+G+Xn
Americans spend over 95% of their
income after taxes
The total of everyone’s expenditures is
called consumption
 Consumption is designated by the letter C
C is the largest sector of GDP
Now C is just over two-thirds of GDP

,Consumption (Continued)
The consumption function states
As income rises, consumption (C) rises,
but not as quickly
Therefore, consumption varies with
disposable income (DI)
 DI increases . . . C increases but by a smaller
amount
 DI decreases . . . C decreases but by a smaller

amount

, Consumption and Disposable
Income
Disposable Income Consumption
Change Total DI Change Total
in in Consum
Income Consum ption
ption

1,000 +1000
1,400 +800

2,000 +1000
2,200 +800

3,000 +1000
3,000 +800


4,000 +1000
3,800 +800


5,000 4,600

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