Macro econ exam 3 - Study guides, Class notes & Summaries

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 fixed unknown number. The constant term in the above equation is often assumed to be zero but here, we take a more general assumption that the constant can be a...