# ECON 1P92 Lecture Notes - Lecture 3: Consumption Function, Retained Earnings, Kraft Dinner

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7 Oct 2016
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## Document Summary

Total desired expenditure (agrregate expenditure, or ae): what would be spent, given. Y, on domestically produced goods and services (g&s). Desired net exports (nx = x im). Ae = c + i + g + x im. Do not change with changes in national income (y) Change with changes in national incomes (y) No foreign sector: ae = c + i. Relationship between c and variables that influence it. Determined by current real disposable income (y0) C = a + byd where a is autonomous consumption expenditure byd is induced consumption expenditure: example: c = 40 + 0. 8 yd, if yd is 100: c = 40 + 0. 8 (100) = . Graph of c goes here with the slope. Mpcyd (0. 8) is constant since slope of line is constant. Change in desired consumption divided by change in disposable income. Slope of the consumption function: mpcyd = change in c / change in yd.