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Economics (923)
ECN 204 (281)
Chapter 8

Chapter 8 macro.docx

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Ryerson University
ECN 204
Tom Barbiero

Chapter 8 macro 81 personal saving is the proportion of disposable income that is not utilizedsaving is calculated through this formula Sdisposable incomeconsumptiona direct relationship exists with disposable income and consumption where the more DI there is the more consumption that takes place the 45 degree line is a reference linewhere each point on the line is where consumption equals disposable incomethe distance between the degree line and the horizontal line measures consumption or disposable income saving is the amount of money where the actual consumption in any year falls under the 45 degree line there is a negative relationship between savings and disposable income The consumption scheduleThe consumption schedulefunction portrays the amounts of income households are spending at different amounts of usable income which demonstrates the direct relationship between the two The saving scheduleIs a schedule that shows how much households save of their disposable income at different levels of disposable incomeThe Saving curve shows that a small proportion of income is saved at a low DI and that a higher proportion of income is saved at higher incomeDisaving at low DIS Is where the consumption curve is above the 45 degree line or where the savings curve penetrates the horizontal axisThe break even income is where consumers spend all of their disposable income and save none of itAt all levels of higher income a larger proportion of their disposable income is savedthis is the vertical distance between the 45 degree line and the consumption line under itAPC and APSThe proportion of total income that is used is the average propensity to consumeAPC the proportion of total income that is saved is the average propensity to save
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