Baruch College, CUNY ECO -Term Project An exercise in macroeconomics:
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Course
ECO 1002 MACRO
Institution
Baruch College, CUNY
Term Project
An exercise in macroeconomics:
Recall that in ECO 1002 or any other intro macro, total consumption expenditure is a function of disposable income (or after-tax
income). Specifically, we have:
Consumption = a constant + (marginal propensity to consume) * (disposable income), and ‘...
they are adjusted for inflation or computed using 1972 prices which means they are real gdp and real consumption suppose we are interested i
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Baruch College, CUNY
ECO 1002 MACRO
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Nereida Saka Barry Ma
Eco 4000
Term Project
An exercise in macroeconomics:
Recall that in ECO 1002 or any other intro macro, total consumption expenditure is a function of disposable income (or after-tax
income). Specifically, we have:
Consumption = a constant + (marginal propensity to consume) * (disposable income), and ‘marginal propensity to consume’ is a
a
fixed unknown number. The constant term in the above equation is often assumed to be zero but here, we take a more general
vi
assumption that the constant can be any number but the number is unknown to us. Note that the above equation as taught in econ
theory has no random term in it.
d
The following data (sample) is obtained from a government publication, Economic Report of the President:
e
Year Disposable Income Consumption
ar
sh
1970 751.6 672.1
1971 779.2 696.8
as
1972 810.3 737.1
w
1973 864.7 767.9
m e
1974 857.5 762.8
1975 874.9
co rc 779.4
o. ou
1976 906.8 823.1
er res
1977 942.9 864.3
eH y
1978 988.8 903.2
rs ud
1979 1015.7 927.6
t
ss
1
hi
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