Marginal propensity to consumeIn economics, the marginal propensity to consume (MPC) is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending (consumption) occurs with an increase in disposable income (income after taxes and transfers). The proportion of disposable income which individuals spend on consumption is known as propensity to consume. MPC is the proportion of additional income that an individual consumes.
Autonomous consumptionAutonomous consumption (also exogenous consumption, autonomous spending) is the consumption expenditure that occurs when income levels are zero. Such consumption is considered autonomous of income only when expenditure on these consumables does not vary with changes in income; generally, it may be required to fund necessities and debt obligations. If income levels are actually zero, this consumption counts as dissaving, because it is financed by borrowing or using up savings.
Induced consumptionInduced consumption is the portion of consumption that varies with disposable income. When a change in disposable income “induces” a change in consumption on goods and services, then that changed consumption is called “induced consumption”. In contrast, expenditures for autonomous consumption do not vary with income. For instance, expenditure on a consumable that is considered a normal good would be considered to be induced.
Consumption (economics)Consumption refers to the use of resources to fulfill present needs and desires. It is seen in contrast to investing, which is spending for acquisition of future income. Consumption is a major concept in economics and is also studied in many other social sciences. Different schools of economists define consumption differently.
Keynesian economicsGroup of macroeconomic theoriesKeynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output and inflation. In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy.
SlopeIn mathematics, the slope or gradient of a line is a number that describes the direction of the line on a plane. It is commonly denoted by the letter m, and is defined as the ratio of the vertical change (rise) to the horizontal change (run) between any two distinct points on the line. It is not a direct distance or a direct angle, but a measure of their ratio.
MacroeconomicsMacroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies. Macroeconomists study aggregate measures of the economy, such as output or gross domestic product (GDP), national income, unemployment, inflation, consumption, saving, investment, or trade.
John Maynard KeynesBritish economist (1883–1946)John Maynard Keynes, 1st Baron Keynes ( ; 5 June 1883 – 21 April 1946), was an English economist whose writings are considered the basis for the school of thought known as Keynesian economics, as well as its various offshoots. Originally trained in mathematics, he built on and refined earlier work on the causes of business cycles.
Disposable incomeDisposable income is total personal income minus current taxes on income. In national accounting, personal income minus the taxes on that income equals disposable income. Subtracting personal outlays for food, housing, transportation, and other forms of personal consumption expenditure yields personal savings. The U.S. Bureau of Economic Analysis defines disposable personal income as personal income less personal current taxes.
EconomicsSocial science studying goods and servicesEuro coinsEconomics () is a social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyses what is viewed as the basic elements of economies, including individual agents and markets, their interactions, and the outcomes of those interactions.Fiscal multiplierIn economics, the fiscal multiplier (not to be confused with the money multiplier) is the ratio of change in national income or revenue arising from a change in government spending. More generally, the exogenous spending multiplier is the ratio of change in national income arising from any autonomous change in spending (including private investment spending, consumer spending, government spending, or spending by foreigners on the country's exports).Stylized factIn social sciences, especially economics, a stylized fact is a simplified presentation of an empirical finding. Stylized facts are broad tendencies that aim to summarize the data, offering essential truths while ignoring individual details. Stylized facts offer strong generalizations that are generally true for entire populations, even when the generalization may not be true for individual observations.*As an Amazon Associate I earn from qualifying purchases.