Divisia index:
, Less rigid approach than
traditional aggregates
Suppose that a household lives for two periods: t=1,2. The house hold chooses her
consumption maximizing:
Give this one a try later!
Formula: write it down
Where Ct is consumption at time t, U=Utility from consumption, B =
Discount factor, Pt = price at time t, R = interest rate, Yt = income at time t.
Solution:
What can a household be divided into?
Give this one a try later!
, According to friedman's Permanent income theory the income of a
household can be divided into two components:
- The permanent income
- The transitory income
Roughly speaking, the first can be thought as the average income of the
household while the second as the deviation from the transitory income
What is aggregate consumption?
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Aggregate consumption is defined as the sum of total expenditure by
households for goods and services. There are different theories of
consumption.
Divisia
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Weighted average of different assets
The average propensity to consume formula:
Give this one a try later!
(C0+cY)/Y = (C0/Y) + c
, Less rigid approach than
traditional aggregates
Suppose that a household lives for two periods: t=1,2. The house hold chooses her
consumption maximizing:
Give this one a try later!
Formula: write it down
Where Ct is consumption at time t, U=Utility from consumption, B =
Discount factor, Pt = price at time t, R = interest rate, Yt = income at time t.
Solution:
What can a household be divided into?
Give this one a try later!
, According to friedman's Permanent income theory the income of a
household can be divided into two components:
- The permanent income
- The transitory income
Roughly speaking, the first can be thought as the average income of the
household while the second as the deviation from the transitory income
What is aggregate consumption?
Give this one a try later!
Aggregate consumption is defined as the sum of total expenditure by
households for goods and services. There are different theories of
consumption.
Divisia
Give this one a try later!
Weighted average of different assets
The average propensity to consume formula:
Give this one a try later!
(C0+cY)/Y = (C0/Y) + c
