Came in late today 20 mins, walked in on marginal propensity to consume.
Marginal propensity to consume – the fraction of an income that is spent, measured in 0-1.0
Aggregate saving – The part of aggregate income that is not consumed.
S=Y-C (triple equals sign, and it means that the equation is an identity that is always true.)
Marginal propensity to save (MPS) – That fraction of a change in income that is saved.
MPC+MPS = 1
Because MPC and the MPS are important concepts, it may help to review their definitions.
The Aggregate Consumption Function Derived from the Equation C = 100-75Y
The aggregate consumption function derived from the Equation C = 100-75Y
We consume a certain fraction of our income.
The idea is that if we consume everything, it would be bad, but if we saved everything, it would
be bad as w