where [c.sub.o] is autonomous consumption
, [c.sub.1] is the marginal propensity to consume, is the marginal propensity to consume out of remittance income and R represents remittance inflows.
(6) Where a is autonomous consumption
, b is the marginal propensity to consume, c is autonomous investment, d is the interest sensitivity of investment, e the is sensitivity of money demand to income, f is the sensitivity of money demand to the interest rate, and M is the real money supply.
Instead of displaying the familiar positive intercept (reflecting positive autonomous consumption
) and a marginal propensity to consume (mpc) between 0 and 1, estimates with sample periods utilizing post-1973 data exhibit large, negative intercept terms in the neighborhood of -225 and mpcs near unity.
Let the consumption function be [C.sup.0]+[alpha][Y-T] where [alpha] is the marginal propensity to consume, C is aggregate consumption, [C.sup.0] is autonomous consumption
, Y is aggregate income, and T is tax revenue.
where [C.sup.*] is an autonomous consumption
component, b is the marginal propensity to consume, T is taxes net of transfers for all levels of government, and Y is income derived from local production; in Model 1 all income generated by E accrues to local residents by assumption.
Since autonomous consumption
is usually zero, consumption is therefore proportional to income.