Principles of Macroeconomics / Unit 9 MAC 0814 short lesson, about 20 seconds
How Large Is the Propensity to Consume
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The idea
The propensity is estimated, not observed. Rebate cheques sent in 2001 in randomly timed batches gave a natural experiment, and three teams reached three different answers.
In practice
The estimates run from about one third, to 40 percent over nine months, to two thirds.
Where people slip
All three found the effect was not negligible. The course's 0.75 is an example, not a measurement.
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