Principles of Macroeconomics / Unit 9 MAC 0811 short lesson, about 20 seconds
What Shifts the Consumption Function
Captions available
The idea
A change in disposable income moves along the function. Two things move the function itself: real wealth, and expectations. Either raises spending at every income level.
In practice
A sustained rise in house and share prices makes owners wealthier and lifts consumption at each income.
Where people slip
Expectations can be self-confirming. If households expect bad times and cut spending, times get worse.
Your place on the trail
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