ECON1102 Lecture Notes - Lecture 9: Macroeconomic Model, Disposable And Discretionary Income, Ceteris Paribus
Document Summary
The amount of money that consumers have available to devote to spending after they have paid their taxes and received transfer payments. (cid:862)cu(cid:396)(cid:396)e(cid:374)t(cid:863) (cid:396)efe(cid:396)s to the ti(cid:373)e pe(cid:396)iod u(cid:374)de(cid:396) a(cid:374)al(cid:455)sis. Much spending is unavoidable or nondiscretionary things like rent, basic food, requirements rather than discretionary things like movies, ga(cid:373)(cid:271)li(cid:374)g . Consumer spending will vary as yd varies. Yd goes up -> c will go up. Yd falls -> c will fall: expected future income. If consumers expect to have more future yd than they have now, this tends to raise their current spending because they believe they can spend more now because their available resources will grow later. Even with higher yd, consumers may cut back their spending now if they believe that future times will be lean. If expected future income is fairly close to current income, maybe growing slowly, then we can probably say that the portion of yd spent will stay fairly stable over time.