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ECON-macro class 2 (what he said)

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Sherry Fukuzawa

- In general equ= actual meets decided - AE=C+ I + G+ NX - some depends on income (induced expenditure) - some is independent of income (automatic expenditure) - Consumption expenditure theoretically should depend on past, present, and future income... - past-borrowed a lot and repaying debt means that you can't spend as much - future depends on your decision...what you need...(if you want to live comfortably after retirement means you save more) - C+S=YB - but your past and future does not matter, because what you have now dictates what you consume - C= a +b Y D - b= change in consumption when there is a change to income ( - linear consumption curve - when you have nothing to spend (no disposable income) but you still want to spend A--min consumption to survive-- - agrigate level...1 dollar of that increase for disposable saved - a=automatic - b = induced - MPC and MPS - when there is change in DI causes change in C and S - Linear C curve - M=same - regardless of how high or low your DI...MPC (marginal Propencity to consume) is always the same - Implies that MPS is also the same - Average - MPC drops as DI increases - average MPC will not rise proportionally to DI - YD=C+ S/Yd=C +S =YD=APC + APS - thus with increase in DI APC drops and APS rises - low income fams saves less because they spend a higher proportion on consumption - thus if you tax the rich and transfer to the poor - at the agrigate level...the rich save less and the poor spend more - savings are capital - output growth is slower because it wi
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