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Macroeconomics 6/c/e
Macroeconomics, 6/e
Rudi Dornbusch, Massachusetts Institute of Technology
Stanley Fischer, International Monetary Fund, on leave from MIT
Richard Startz, University of Washington
Frank Atkins, University of Calgary
Gordon Sparks, Queen's University
Consumption and Saving

Chapter Objectives

After reading and studying this chapter, you should be able to:

Understand that consumption is a large but relatively stable fraction of GDP.

Understand that modern theories of consumption behaviour link lifetime consumption to lifetime income. These theories suggest that the marginal propensity to consume out of transitory income should be small.

Understand that empirical evidence suggests that both modern theories and simple Keynesian "psychological rule-of-thumb" models contribute to explaining consumption.




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