《宏观经济学教学课件》Chapter_13.pptVIP

Introduction Consumption accounts for about 70% of AD Fluctuations in C are proportionately smaller than the fluctuations in GDP Consumption is relatively stable In this chapter we seek to understand consumption and the link between consumption and income Consumption theory The debate over different consumption theories = debate over the size of the marginal propensity to consume (MPC) Keynesian model MPC is high, modern theories MPC is low Introduction Figure 13-2 plots changes in per capita consumption and changes in per capita disposable income Consumption follows income swings that last 5-10 years Consumption does not respond to spikes in income Introduction Figure 13-2 compares consumption this quarter to the previous quarter: Consumption is almost perfectly predicted by previous consumption This relationship is an outcome of the link between current consumption and expected future consumption Used in the modern theories of consumption Introduction Early Keynesian theories explained consumption as a function of current disposable income (Figure 13-3) No separation for temporary and permanent income This consumption function is of the form: (1), where c is the MPC and is on the [0,1] range Modern consumption theories incorporate intertemporal dynamics Life Cycle Theory The life cycle hypothesis views individuals as planning their consumption and savings behavior over long periods with the intention of allocating their consumption in the best possible way over their entire lifetimes Different MPC out of permanent income, transitory income, and wealth compared to the Keynesian theory with a single MPC Key assumption: most people choose stable lifestyles, or smooth out consumption over their lifetime Individuals do not like consumption to change dramatically from year to year The simplest form of this assumption is to consume the same amount in every year Life Cycle Theory Suppose an individual: Starts life at age 20 Plans to work unt