National Saving Investment Consumption Function

                                “In the long run we all are dead” John Keynes  

What Did We Learn So Far ? RECAP

National Savings, public and private savings

Components of GDP

Marginal Propensity to Consume

Brief overview of factor prices and production function

Real Interest rate and investment

Graph: The middle Road | Data Source Bea.gov

Economy’s Output Variables 

Consumption depends positively on disposable income =  (Y-T)

Investment inversely related to real interest rate

Exogenous variables: Fiscal policy tools (Government Purchases and Tax)

Endogenous : National Savings and Investment

The video shares an understanding of consumption function and the assumptions behind this model.

Video: The middle Road 

            National Savings Investment ====>       S = (Y-T-C) + (T-G)=I

                                          (Y-T-C) ===> private savings

                                              (T-G)====> public savings 

Ahead look at solved problems on this topic.  Look at Supply of Loanable Funds and Effect of fiscal policy on National Savings.