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,单击此处编辑母版标题样式,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,*,Macroeconomics Chapter 7,*,单击此处编辑母版标题样式,Macroeconomics Chapter 7,*,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,Consumption and Saving,Household budget constraint,C,+(1/,P,),B,+,K,=,/,P,+(,w,/,P,),L,+,i,(,B,/,P,+,K,),/P,=0,C,+(1/,P,),B,+,K,=(,w,/,P,),L,+,i,(,B,/,P,+,K,),consumption,+,real saving,=,real income,1,Macroeconomics Chapter 7,Consumption and SavingHousehol,Consumption and Saving,2,Macroeconomics Chapter 7,Consumption and Saving2Macroec,Consumption and Saving,Consumption Over Two Years,Year,1,C,1,+(,B,1,/,P,+,K,1,)(,B,0,/,P,+,K,0,)=,(,w,/,P,),1,L,+,i,0,(,B,0,/,P,+,K,0,),consumption in year,1,+,real saving in year,1,=,real income in year,1,Year,2,C,2,+(,B,2,/,P,+,K,2,)(,B,1,/,P,+,K,1,)=,(,w,/,P,),2,L,+,i,1,(,B,1,/,P,+,K,1,),consumption in year,2+,real saving in year,2=,real income in year,2,3,Macroeconomics Chapter 7,Consumption and SavingConsumpt,Consumption and Saving,Consumption Over Two Years,Combine the budget constraints to describe a households choice between consuming this year,C,1,and next year,C,2,.,B,1,/,P,+,K,1,=,B,0,/,P,+,K,0,+,i,0,(,B,0,/,P,+,K,0,)+(,w,/,P,),1,L,C,1,Real assets end year,1,=,real assets end year,0,+,real income year,1,consumption year,1,4,Macroeconomics Chapter 7,Consumption and SavingConsumpt,Consumption and Saving,5,Macroeconomics Chapter 7,Consumption and Saving5Macroec,Consumption and Saving,6,Macroeconomics Chapter 7,Consumption and Saving6Macroec,Consumption and Saving,Consumption Over Two Years,B,1,/,P,+,K,1,=,(1+,i,0,),(,B,0,/,P,+,K,0,)+(,w,/,P,),1,L,C,1,B,2,/,P,+,K,2,=,(1+,i,1,),(,B,1,/,P,+,K,1,)+(,w,/,P,),2,L,C,2,B,2,/,P,+,K,2,=,(1+,i,1,),(1+,i,0,),(,B,0,/,P,+,K,0,)+(,w,/,P,),1,L,C,1,+(,w,/,P,),2,L,C,2,7,Macroeconomics Chapter 7,Consumption and SavingConsumpt,Consumption and Saving,Consumption Over Two Years,C,2,+(1+,i,1,),C,1,=(1+,i,1,),(1+,i,0,),(,B,0,/,P,+,K,0,),+(1+,i,1,),(,w,/,P,),1,L,+(w/P),2,L-(B,2,/P,+,K,2,),Two-year household budget constraint:,C,1,+,C,2,/(1+,i,1,)=(1+,i,0,),(,B,0,/,P,+,K,0,)+(,w,/,P,),1,L,+(,w,/,P,),2,L,/(1+,i,1,)(,B,2,/,P,+,K,2,)/(1+,i,1,),8,Macroeconomics Chapter 7,Consumption and SavingConsumpt,Consumption and Saving,Present value,If the interest rate,i,1,is greater than zero,$1 received or spent in year 1 is equivalent to more than$1 in year 2.,Dollars received or spent in year 2 must be,discounted,to make them comparable to dollars in year 1.,The term 1+,i,1,is called a,discount factor,.,9,Macroeconomics Chapter 7,Consumption and SavingPresent,Consumption and Saving,Household chooses the time path of consumptionin this case,C,1,and,C,2,to maximize utility,subject to the budget constraint.,10,Macroeconomics Chapter 7,Consumption and SavingHousehol,Consumption and Saving,Choosing consumption:income effects,C,1,+,C,2,/(1+,i,1,)=(1+,i,0,),(,B,0,/,P,+,K,0,)+(,w,/,P,),1,L,+(,w,/,P,),2,L,/(1+,i,1,)(,B,2,/,P,+,K,2,)/(1+,i,1,),p.v.of consumption,=,value of initial assets,+,p.v.of wage incomes,p.v.of assets end year 2,V,=(1+,i,0,),(,B,0,/,P,+,K,0,)+(,w,/,P,),1,L,+(,w,/,P,),2,L,/(1+,i,1,),p.v.of sources of funds,=,value of initial assets,+,p.v.of wage incomes,11,Macroeconomics Chapter 7,Consumption and SavingChoosing,Consumption and Saving,Choosing consumption:income effects,C,1,+,C,2,/(1+,i,1,)=,V,(,B,2,/,P,+,K,2,)/(1+,i,1,),p.v.of consumption,=,p.v.of sources of funds,p.v.of assets end year,2,12,Macroeconomics Chapter 7,Consumption and SavingChoosing,Consumption and Saving,Choosing consumption:income effects,Suppose that,V,increases due to a rise in wage incomes.Since we are holding fixed the term(,B,2,/P,+,K,2,),/,(1+,i,1,),the total present value of consumption,C,1,+,C,2,/,(1+,i,1,),must rise by the same amount as,V,.,Since households like to consume at similar levels in the two years,we predict that,C,1 and,C,2 will rise by similar amounts.These responses of consumption to increases in initial assets or wage incomes are called,income effects,.,13,Macroeconomics Chapter 7,Consumption and SavingChoosing,Consumption and Saving,Choosing consumption:the intertemporal-substitution effect.,C,1,+,C,2,/(1+,i,1,)=,V,(,B,2,/,P,+,K,2,)/(1+,i,1,),p.v.of consumption,=,p.v.of sources of funds,p.v.of assets end year,2,14,Macroeconomics Chapter 7,Consumption and SavingChoosing,Consumption and Saving,Choosing consumption:the intertemporal-substitution effect.,A higher,i,1,provides a greater reward for deferring consumption.Therefore,the household responds to an increase in,i,1,by lowering,C,1,and raising,C,2,.,This response is called the,intertemporal-substitution effect,.,15,Macroeconomics Chapter 7,Consumption and SavingChoosing,Consumption and Saving,Choosing consumption:the intertemporal-substitution effect.,C,1,+(,B,1,/,P,+,K,1,)(,B,0,/,P,+,K,0,)=(,w,/,P,),1,L,+,i,0,(,B,0,/,P,+,K,0,),Consumption in year,1,+,real saving in year,1,=,real income in year,1,16,Macroeconomics Chapter 7,Consumption and SavingChoosing,Consumption and Saving,Choosing consumption:the intertemporal-substitution effect.,We know from the intertempo
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