Illustrate what the reason which individuals households

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Reference no: EM1345685

Some economists argue against the shape of the Keynesian consumption function, which shows positive consumption and negative savings at zero income. These economists believe the consumption function is proportional to income. Statistical evidence has shown that latter type of consumption function is more in line with national data (aggregate consumption as a function of aggregate income for the entire country) and the Keynesian consumption function is generally supported by cross sectional data, or data collected from individual households. Discuss the following questions:

· Why do you think this difference exists?

· Illustrate what the reason which individuals households at some time in their lives spend more than they earn and at other times save some of what they earn?

Reference no: EM1345685

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