[{"data":1,"prerenderedAt":171},["ShallowReactive",2],{"term:consumption-function":3},{"term":4,"related":162},{"id":5,"title":6,"body":7,"category":145,"description":146,"extension":147,"faq":148,"meta":149,"navigation":150,"path":151,"related":152,"seo":155,"stem":156,"takeaways":157,"__hash__":161},"terms\u002Fterms\u002Fconsumption-function.md","Consumption Function",{"type":8,"value":9,"toc":139},"minimark",[10,15,19,22,26],[11,12,14],"h2",{"id":13},"understanding-consumption-function","Understanding Consumption Function",[16,17,18],"p",{},"Keynes argued that consumption rises with income, but by less than the full increase. The simplest version is C = a + bY, where a is spending at zero income and b is the MPC.",[16,20,21],{},"Later theories, such as Milton Friedman's permanent income hypothesis and Franco Modigliani's life-cycle hypothesis, argued that people base spending on long-run expected income, not just this year's.",[11,23,25],{"id":24},"formula","Formula",[27,28,31],"span",{"className":29},[30],"katex-display",[27,32,35,75],{"className":33},[34],"katex",[27,36,39],{"className":37},[38],"katex-mathml",[40,41,44],"math",{"xmlns":42,"display":43},"http:\u002F\u002Fwww.w3.org\u002F1998\u002FMath\u002FMathML","block",[45,46,47,70],"semantics",{},[48,49,50,54,58,61,64,67],"mrow",{},[51,52,53],"mi",{},"C",[55,56,57],"mo",{},"=",[51,59,60],{},"a",[55,62,63],{},"+",[51,65,66],{},"b",[51,68,69],{},"Y",[71,72,74],"annotation",{"encoding":73},"application\u002Fx-tex","C = a + bY",[27,76,80,107,128],{"className":77,"ariaHidden":79},[78],"katex-html","true",[27,81,84,89,95,100,104],{"className":82},[83],"base",[27,85],{"className":86,"style":88},[87],"strut","height:0.6833em;",[27,90,53],{"className":91,"style":94},[92,93],"mord","mathnormal","margin-right:0.0715em;",[27,96],{"className":97,"style":99},[98],"mspace","margin-right:0.2778em;",[27,101,57],{"className":102},[103],"mrel",[27,105],{"className":106,"style":99},[98],[27,108,110,114,117,121,125],{"className":109},[83],[27,111],{"className":112,"style":113},[87],"height:0.6667em;vertical-align:-0.0833em;",[27,115,60],{"className":116},[92,93],[27,118],{"className":119,"style":120},[98],"margin-right:0.2222em;",[27,122,63],{"className":123},[124],"mbin",[27,126],{"className":127,"style":120},[98],[27,129,131,135],{"className":130},[83],[27,132],{"className":133,"style":134},[87],"height:0.6944em;",[27,136,138],{"className":137,"style":120},[92,93],"bY",{"title":140,"searchDepth":141,"depth":141,"links":142},"",2,[143,144],{"id":13,"depth":141,"text":14},{"id":24,"depth":141,"text":25},"economy","The relationship between household spending and income.","md",[],{},true,"\u002Fterms\u002Fconsumption-function",[153,154],"marginal-propensity-to-consume","keynesian-economics",{"title":6,"description":146},"terms\u002Fconsumption-function",[158,159,160],"Consumption rises with income, but less than one for one.","Its slope is the marginal propensity to consume.","Modern theories stress expected lifetime income.","r4BfRhdDPXhOnUZpUp4KdUR_mOzftIo0XeAVZLchwoI",[163,167],{"title":164,"description":165,"path":166},"Keynesian Economics","The school of thought that total demand drives output and employment in the short run, and that policy can stabilize it.","\u002Fterms\u002Fkeynesian-economics",{"title":168,"description":169,"path":170},"Marginal Propensity to Consume (MPC)","The share of an extra dollar of income that a household spends.","\u002Fterms\u002Fmarginal-propensity-to-consume",1793374004799]