Income and Expenditure - Consumer Spending - Shifts of the Aggregate Consumption Function
3 important questions on Income and Expenditure - Consumer Spending - Shifts of the Aggregate Consumption Function
What 2 principles shift the aggregate consumption function? And when does it not shift?
- When other things equal changes in Expected disposable income and changes in aggregate wealth occur the consumption function shifts.
- but this could be any thing other than the disposable income itself
- when the disposable income changes the consumption function does not shift
What happens when Y<AE
INVENTOR WILL FALL TO BRING Y=AE again
For a given fluctuation in autonomous expenditure, economies with higher lump-sum income tax will experience:
Some business cycle fluctuations in real GDP but the fluctuations are independent of the lump-sum tax
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