# ECON 1P92 Lecture Notes - Lecture 8: Consumption Function, Disposable And Discretionary Income

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###### ECON 1P92 Full Course Notes

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Econ 1p92 - lecture 8 notes: ch 22: adding government to the simple macro model. Suppose t= 0. 1y. (taxes = 10% of y) Then, yd = y 0. 1y = 0. 9y (disposable income = 90% of y) C = a + b (y - t) C = a + b (y - ty) C = a + b[(1 - t)y] In last example, c = 10 + 0. 8 (1 0. 1)y. Ae = c + i + g + x - im : C = a + b yd = a + b(1 - t)y. Ae = c + i + g + x im. = a + b(1 - t)y + i + g + x my. Ae = a + i + g + x + [b(1 - t) - m]y (autonomous) (induced) (induced expenditure depends on y) Change in aggregate expenditure (ae) when national income (y) changes: Or, b(1 - t ) - m.