Aggregate consumption, Macroeconomics

 

Aggregate Consumption 

This is the aggregate of all expenditures on current consumption goods and services i.e. those which are consumed during the period. Living standards are usually correlated to per capita consumption of goods and services. This is obtained by dividing aggregate consumption by population.Current consumption is normally the proximate goal of economic activity. At low levels of income almost all of it has to be spent on current consumption - food, clothing, rent, fuel, education, etc. As income levels rise it is possible to set aside some income for saving. The relationship between aggregate consumption expenditures and aggregate income of household sector is known as the consumption function, that is C = C(Y). Consumption expenditure may be related to either national income or disposable income. It is one of the most important relationships in macroeconomics. 

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