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2024/11/6LearningObjectivesGDPandBigNumbersFourPartsofGDPConsumptionConsumptionFunctionExample:ConsumptionandDisposableIncome(inbillionsofdollars)ConsumptionandDisposableIncomeSavingSource:EconomicReportofthePresident,2010,SurveyofCurrentBusiness,March2010HouseholdSavingasaPercentageofDisposableIncomein2009QuestionsforThoughtandDiscussionFourConceptsAveragePropensitytoConsume(APC)(ThePercentofDISpent)APCvaluesandtheirmeaningSampleAPCProblemDisposableIncomeConsumptionSaving $40,000$30,000SampleAPCProblemSampleAPCProblemAPCsGreaterThanOneAPCsGreaterThanOneAPCsGreaterThanOneAPCsGreaterThanOneAPCsGreaterThanOneAveragePropensitytoConsume,SelectedCountries,2009MarginalPropensitytoConsume(MPC)CalculateMPCUsingHypotheticalDataCalculatingMPCCalculatingMPSGraphingtheConsumptionFunction:The45-DegreeLineGraphingtheConsumptionFunctionTheSavingFunctionAutonomousConsumptionvs.InducedConsumptionQuestionsforThoughtandDiscussionConsumerSpending,1955and2009($billions)ConsumptionasaPercentageofGDP1980-2010DeterminantsoftheLevelofConsumptionDeterminantsoftheLevelofConsumption(Continued)PermanentIncomeHypothesisAmericanshavebeenonaspendingbingeforthelast30years. Governmentpoliciesencouragedconsumption: Mortgageinterestandpropertytaxesaretax-deductable. Thetremendousexpansionofbankcreditcards,installmentcredit,andconsumerloanshasfurtherfueledtheconsumerbinge. SavingsasPercentageofGDP,1959-2009 Whydoesitmatter?CurrentIssue:TheAmericanConsumer:WorldClassShopper