Key Points
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Consumption – most important single element of AD (typically accounts for ½ - 2/3 of Total Final Expenditure)

Permanent Income and Life-Cycle hypotheses – developed in 50s & 60s in response to a discrepancy between:

i.) Consumption function estimated from LR time series data, and

ii.) Much flatter consumption function estimated from SR time series & cross section data.

Other Notes in this Category

1. Access to credit / Financial Deregulation
2. Consumption
3. Consumption and Saving Exam Questions
4. Determinants of Consumption
5. Inflation
6. Interest Rates and Monetary Policy
7. Key Points
8. Other Theories of the Consumption Function
9. Problems with Consumption Functon
10. Unemployment/Consumer Confidence/Uncertainty
11. Wealth Effect – Asset Prices, Debt Burden, and Windfall Gains

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