consumption function

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consumption function

a statement of the general relationship between the dependent variable, CONSUMPTION EXPENDITURE, and the various independent variables that determine consumption, such as current DISPOSABLE INCOME and income from previous periods and WEALTH. See CONSUMPTION SCHEDULE, LIFE-CYCLE HYPOTHESIS, PERMANENT-INCOME HYPOTHESIS, WEALTH EFFECT.
References in periodicals archive ?
An important feature of Keynesian consumption function known as absolute income hypothesis (AIH) is that average propensity to consume decreases as income increases.
Recognizing that the Keynesian model has largely captured the imagination of the economics profession and been integrated with classical economics into what Paul Samuelson calls the "neo-classical synthesis," Garrison brilliantly created a series of diagrams to demonstrate the relationship between the time structure of production, Hayekian triangles, and standard "neo-classical" models, including the production-possibility frontier, the loanable funds market, the IS--LM curve, and the Keynesian consumption function (Garrison 2001).
In addition, the cumulative extension of credit to all, while obviously an individual 'good', became more and more a public 'bad' at the systemic level as changes in borrowing and lending rates to consumers, combined with wealth effects, served to make the Keynesian consumption function as unstable and volatile as investment expenditure traditionally was known to be: hence, the enlarged amplitudes of trade cycles and deeper and more prolonged slumps.
The standard view of the government purchases multiplier--as expressed, for example, in the quote from Gall and coauthors in the previous section-is that a Keynesian consumption function delivers fairly high multipliers.
An important implication of the Keynesian consumption function is that saving rate increases with income.
In the Spring, 1988 issue of this journal, Edward Shapiro observed that estimates of the short run textbook Keynesian consumption function utilizing post-1973 data are radically different from those which were obtained using earlier sample periods.
From a policy perspective, the existence of a large precautionary saving motive implies that, as far as certain policies are concerned, the response of consumers to changes in income may be close to that suggested by the Keynesian consumption function.
Secondly, the life cycle model may not fare will against a competing model such as a simple Keynesian consumption function.
An example of a fixed-coefficient equation is the simplified Keynesian consumption function
For a given wage, a Keynesian consumption function implies a positive relation between hours, which determine income, and consumption (Hall [1984]).
Criticisms fall into four categories: (1) failure of the model to reckon with supply inelasticities; (2) drift over time of estimated parameter values due to evolving local economies; (3) focus on exports to the exclusion of other autonomous sources of demand; (4) weaknesses that any Keynesian consumption function exhibits.
The first is the simple Keynesian consumption function which specifies that consumption (C) depends on disposable income ([Y.