J.M. Keynes: subjects form their consumption depending on the current income they receive.

J.M. Keynes wrote that consumer preferences influence the division of income into saving and consumption and that people spend more on consumption as income increases, but less as income increases.

People's desire to save their income is determined (according to Keynes):

Save for emergencies;

For old age, for education;

Make deposits to earn interest;

Remain independent;

Leave an inheritance to children;

Feeling of greed.

There is an indicator of the average propensity to save and consume. Average propensity to save (APS) - the share of savings in disposable income:

where S - savings; DI - from English disposable income - disposable income.

Average propensity to consume (APC) - share of consumption in disposable income:

where C is consumption; DI - disposable income.

0 Since disposable income is either consumed or saved, at any level, the sum of the consumed and saved parts must exhaust the entire income:

APC + APS = 1.

When disposable income changes, the marginal propensity to save and consume is calculated.

Marginal propensity to save (MPS) is the share of the increase in saving in any change in disposable income:

where ΔS - change in savings; - change in location

the expected income that caused such a change in savings.

0 Marginal propensity to consume (MPC) - the share of growth in consumption in the change in disposable income:

where ΔC - change in consumption; - change in location

taxable income that caused such a change in consumption.

0 MPC + MPS = 1.

Keynesian theory includes the following elements:

1) consumption function as a dependence on disposable income C = C(P1), where DI is disposable income;

2) marginal propensity to consume (MPC);

3) Keynesian consumption function:

where C 0 is autonomous consumption (minimum level of consumption).

At each point of the bisector, consumption is equal to disposable income (Fig. 2.1), i.e. C = DI.

Graphically, savings are the amount by which actual consumption for any year differs from the position of the bisector (Fig. 2.2):

Rice. 2.1. Consumption schedule 4) Savings function:

Rice. 2.2. Savings Schedule Marginal Propensity to Consume

MPC (Fig. 2.3) is the numerical value of the slope of the consumption curve: MPC = 15:20 = 0.75.

Rice. 2.3. Marginal propensity to consume

Marginal propensity to save

MPS (Fig. 2.4) is the numerical value of the slope of the savings curve:

MPS = 5:20 = 0.25.

Rice. 2.4. Marginal propensity to save

Simon Kuznets, an American economist, in his first book “The Centenary Dynamics of Production and Prices” (1930), dedicated to the analysis of economic growth, came to the conclusion that there is a cyclical component in the dynamics of the production of goods and prices.

Aggregate demand includes consumer demand (consumption expenditures) and investment demand (expenditures on capital goods). The main component of total expenses is consumption.

Saving has a significant impact on consumption. Consumption, Consumption is the use of goods, savings, and services to satisfy a certain function of a divided need. The greater the quantity and quality of material goods and services supplied to the population for consumption, the higher the standard of living. The level of consumption depends, in turn, on family income, the share of it that is spent by the population on the purchase of material goods and services.

Savings represent the portion of income not earmarked for consumption expenditures. Saving is the use of income for hoarding (storing valuables without using them for profit), deposit, loan, or direct investment. This is also part of the population's cash income that people save for future purchases and to meet future needs.

Savings are the difference between disposable income and consumer spending: Savings = Income - Consumption. They can actually be invested and transferred to the disposal of business entities in need of financial resources. Saving means reducing current consumption, and saving

The real significance of savings is revealed in their relationship to investment. Savings form the basis for investments.

In economic theory, concepts such as consumption function and savings function are used to analyze the role of consumption and savings.

The consumption function describes the movement of consumer income, the amount of consumption in the total mass of expenses, the savings function - the movement of savings, the amount of savings in their relation to income. There may be no savings, so the saving function is a derivative of the consumption function.

Trends in changes in consumption and savings as income increases are characterized by the marginal propensity to consume and the marginal propensity to save. The marginal propensity to consume shows what part of the population's additional income goes to increase consumption, the marginal propensity to save shows what part of the additional income the population uses for additional savings when the amount of income changes.

If the marginal propensity to consume is 0, then the entire increment in income is saved, since saving is that part of income that is not consumed. If it is equal to 1, then the entire increase in income will be used for consumption. With a marginal propensity to consume of 0.5, the increase in income will be divided equally between consumption and saving. The sum of the marginal propensity to consume and the marginal propensity to save for any change in income must always be equal to 1.

Consumption and saving grow as income grows - the main factor determining the amount of consumption and saving. Moreover, under conditions of stable economic growth, the marginal propensity to consume tends to decrease, and the marginal propensity to save tends to increase. In inflationary conditions the opposite is true.

It should also be noted that factors of consumption and savings that are not related to income growth: rising taxes, rising prices, rising social security contributions, increased demand and increased supply in the market. An increase in taxes can affect the reduction of consumption and savings,

an increase in prices will cause different reactions in consumption and savings among population groups with different incomes; increased demand can contribute to a sharp increase in consumption, and an increase in supply in the market or an increase in social insurance contributions -? reduction in savings.

The process of converting savings into capital is the essence of accumulation.

Essence The concept of “accumulation” is applicable to all types

and economic factors. It reveals the essence of the pro-accumulation process of increasing real capital (means of production, fixed and working capital).

Economic development is associated with the attraction of additional monetary, labor and material resources. To ensure expanded reproduction of material and personal factors of production, part of the surplus product is converted into additional factors of production. Accumulation is the process of converting part of the surplus product into additional factors of production (elements of new production, capital). The source of accumulation is surplus product.

Accumulation is accompanied by increased concentration and centralization of capital. Centralization of capital (voluntary or forced merger of enterprises) increases the possibilities of accumulation, since there is a kind of increase in the accumulation fund - the accumulation funds of the merged enterprises are summed up. The concentration of capital is the growth of capital as a result of the accumulation of surplus product. It leads to an increase in the scale of production due to the transformation of part of the surplus product obtained at a given enterprise into elements of new production. There is an increase in capital. In this regard, the concentration of capital is identical to accumulation.

In modern economic theory, the concept of “accumulation” is gradually being replaced by the concepts of “concentration” and “unification”. It is noted that the structure of the modern economy is subject to the influence of two trends: one of them is the tendency towards concentration, which is embodied in the creation of large production units; Another is the tendency towards unification, which finds expression in a wide variety of agreements between enterprises.

yatiyami. Methods and forms of concentration and associations are considered accordingly.

A distinction is made between technical and financial concentration. Technical concentration (real accumulation - accumulation in natural form or material) means an actual increase in fixed and working capital, leading to an increase in the size and other parameters of the enterprise. Financial concentration manifests itself in the creation and development of groups exercising control over a large number of enterprises or areas of activity.

The main forms of concentration are horizontal and vertical (or integration). With horizontal concentration, an enterprise concentrates more and more capital and labor, while continuing to engage in the same type of activity. Vertical concentration is the unification under a single leadership of industrial enterprises that complement each other in such a way that the product of one serves as material for the other.

The trend towards enterprise consolidation is also due to the development of enterprise diversification (complementary integration), which consists in the fact that an enterprise produces or sells a number of different products. Diversification can be internal (when large enterprises begin to produce new products in addition to their previous products) and external (when one enterprise buys another to obtain new products). Diversification helps mitigate seasonal, and especially cyclical, fluctuations. During periods of economic downturn, specialized enterprises are forced to reduce their activities. On the contrary, a diversified enterprise can reorient its investments from industries that are in decline to industries whose products are successful, since demand does not decrease simultaneously for all products and products.

The ratio of the capitalized part of the surplus product to GDP, expressed as a percentage, is called the rate of accumulation. The higher the rate of accumulation, the greater the growth of production (of course, if additional factors are used effectively) and the greater the possibility of consumption in the future, but the smaller the amount of consumption in the present. Therefore, it is necessary to strive for the optimal ratio

niyu accumulation and consumption. The essence of this optimality is to ensure a normal level of consumption at the present time and at the same time to create conditions for expanded reproduction in order to increase consumption in the future. Increased production efficiency makes it possible to achieve greater final results with smaller amounts of accumulation.

In countries with a market economy, the issue of accumulation is theoretically resolved at the discretion of enterprises, which themselves assess its feasibility depending on the possibilities of self-financing (financing from their own resources) and the cost of raising borrowed funds (for example, a loan). In practice, the existence of the public sector and the intervention of the state in regulating growth result in the state being the center of decision-making in the field of accumulation. Therefore, accumulation should be considered as a process of expanding production both nationwide and in individual areas, industries, and individual enterprises.

All economic entities that have the ability to create accumulation funds must take into account factors affecting the amount of accumulation. For the state as a whole, the accumulation process is influenced by such factors as the size of GDP, the rate of accumulation, the productivity of social labor, etc. For an enterprise, these are factors of growth in labor productivity, the income tax rate, interest on loans, the amount of net profit and the rate of its reinvestment , depreciation, dividends, etc.

The main factors determining the amount of accumulation are:

1) the amount of surplus product and the proportion of its division into the accumulation fund and the consumption fund. The greater the value of the surplus product and the more of it is used for accumulation, the greater the possibility of expanded reproduction;

2) the degree of use of production factors;

3) labor productivity and factors of its growth;

4) the difference between the means of labor consumed and used.

Accumulation is accompanied by an increase in the scale of production

ity, concentration and centralization of production and, ultimately, national wealth.

Accumulation is considered in economic theory as a prerequisite and consequence of investment activity - the totality of practical actions of the investor to make investments.

§ 2. Investments

Concept Investments - the most important element of co-investments of capital expenditures - are determined by the availability of savings and are financed for

classification of savings accounts of the population, economic entities, and the state. Investments are a way of investing monetary, tangible and intangible assets in business objects in order to generate income. Without generating income or achieving impact, there are no incentives to invest. At the same time, investments can be interpreted as an exchange of satisfying today's needs for satisfying them in the future with the help of invested goods: to invest means to deprive oneself of certain goods in the present in the hope of receiving in the future income and services that exceed the cost of these goods in the present.

For an investor, the main thing is to achieve the goals that he sets when financing an investment project, and the created object turns into a means to achieve the goal. (The goals of investment activity can be obtaining a stable high income, protecting capital from inflation, achieving certain competition goals (increasing market share, developing new markets), increasing the value of the company, etc.

The movement of an investment can be considered as a chain of metamorphoses (transformations):

Resources (goods, values), their investments, which represents the investment process itself as a process of transformation of investments into objects of investment activity;

Investments as an increase in capital value that has a use value to create income;

Increase in capital value in the form of income received as a result of investment;

Income (or part of it) as a source of new investment. And then a new turnover of investments begins. Investments reflect all types of values ​​invested

into objects of entrepreneurial and other types of activity in order to generate profit (income) and achieve a social effect: cash, targeted bank deposits, shares, shares and other securities, technologies, machines, equipment, licenses, loans, any other property and property rights , intellectual values. Therefore they need classification.

Investments are classified according to certain criteria.

According to investment objects, the following are distinguished:

Real investments (capital investments) - in tangible and intangible assets. They are divided into gross, which includes all capital investments, and net (all capital investments minus depreciation);

Financial - long-term investments in stocks, bonds and other securities issued by private companies and the state, as well as placement of capital in banks (targeted cash deposits, bank deposits).

By the nature of participation in investment:

Direct - capital investments directly into the production of any product, including the purchase, creation or expansion of enterprise funds, as well as all other operations related to establishing control over the enterprise and expanding the scope of its activities;

Indirect (indirect) - portfolio investments (in securities or property assets). The investor acts through financial intermediaries.

By type of ownership:

Private, formed from funds (own and attracted) of private enterprises and organizations, citizens;

State, formed from the state budget;

Joint.

By nationality:

Internal;

Foreign - invested by other states,

foreign, with

"" banks, companies, entrepreneurs and

other country owners.

^ ШЯУ^у investment: short-term, medium-term and long--

Level of investment risk: risk-free, low-risk

> medium-risk, high-risk, speculative, etc.

It is necessary oCog0 to distinguish this type of investment as investment 61 with "--

^ -Human capital, - investments in education -

tion, health care1

in the availability of information, etc. CR compliance

human capital to economic and scientific regulations. - ,

J Cho-technical situation allows us to ensure

effective*.

g economy as a whole, individual enterprises

and organize - t-g

^chts. Investments in human capital increase production. ,

g labor vigilance, promote sustainable

economically

T. . „ "toy to economic growth.

its form of real investment is capital „ in V

investments (capital investments) - investments in OSNOvTsg. - A

poi capital, funds allocated for restoration

eo fixed assets of enterprises. Capital investments0

h are carried out in the form of new construction,

reconstruction, modernization and major repairs. They can be Tif))lMbLMU (investments directly into the investment object /

*H and indirect (investments in those associated with the main volume.

^you, in the production and social infrastructure °cjjOBHbIX of investment objects). Effective

2-2.-^the value of capital regulations is determined

by way of drinking--

of costs and results and depends on a number of F^1st0rOV_ Increasing the efficiency of capital investments DOg. --

" Stitched:

as a result of improving the technological structure of capital Vi - g,

Vgenia. The experience of advanced countries of the world shows that up to ip 0/,

oU% of costs is allocated to equipment, for the growth of funds 1ruda;

by coincidence>,

„ J fencing the structure of capital investments

Most of them are aimed at technical re-equipment and ^

reconstruction of existing enterprises and fewer hours

gis for new construction; by co^

1increasing the timing of new construction, timely INPUT.

^Ohm and the development of new capacities.

ri estimating the efficiency of capital investments especially

Of great importance are the time factor, the quality of technical projects and their compliance with the requirements of technology, product quality, working conditions, environmental protection, etc.

Sources of investment are determined by the availability of savings and investments and are financed through savings and investments. The source of investment financing is the funds of the population, own, attracted and borrowed capital of enterprises, investment allocations from the state budget, etc. Sources of investment can be classified according to several criteria. As a rule, the following stand out:

Own financial resources - profit, depreciation, reserve funds of the enterprise;

Borrowed financial resources - bank and budget loans, bond loans (funds received from the issue and placement of bonds), commercial loans from suppliers of material resources when purchasing these resources with deferred payment, leasing of specially ordered equipment with deferred repurchase after it is delivered with permission to use it on a lease basis, other borrowed funds;

Raised financial funds - funds from the sale of shares, shares and other contributions of members of labor collectives, citizens, legal entities;

Other (mixed or non-traditional sources of financing) - foreign investments, funds from extra-budgetary funds, etc.

There are internal and external sources of investment. Domestic sources of investment include savings of the population, own funds of enterprises, budgetary allocations, long-term loans and borrowings, domestic scientific developments, intellectual rights, raw material reserves, subsoil, land; to external sources - foreign direct investment, foreign portfolio investment, foreign loans and borrowings, barter (commodity) investment, foreign scientific developments, the latest technologies.

The question of the possibility of using foreign investment is of particular importance in Russian conditions. With extremely limited investment resources and huge

Structural and investment policy

Given the need for them to revive the national economy, their importance is great. The obstacles to resolving this issue are the economic and socio-political instability in the country, the lack of reliable structures for attracting and guaranteeing foreign investment, the high level of crime and corruption, the underdevelopment of banking and other infrastructure, etc. For these reasons, Russia remains a country of high investment risk. This circumstance restrains not only foreign but also domestic investors.

The economic policy of the state includes, as one of its components, the industrial policy - a set of long-term government measures aimed at increasing production, developing and mastering scientific and technological achievements, improving the structure of the economy, and developing the export of finished products. The main goal of industrial policy in Russia should be structural modernization, since the current structure of the country's economy does not meet modern requirements. It is dominated by the extractive industries and primary processing, with insufficient development of final production, especially high-tech and knowledge-intensive ones.

Structural policy is part of the state's industrial policy and involves gradual improvement and adjustment of the existing structure of the national economy by curtailing old unprofitable ones and promoting promising, new industries; should stimulate structural changes and contribute to the creation of economic and social infrastructure for the intended innovations. This requires the implementation of a comprehensive and flexible investment policy, the development of investment programs aimed at changing the structure of the economy, modernizing enterprises, improving technology, reducing costs and increasing living standards.

Investment policy is a set of government measures aimed at:

Identification of priority areas and investment objects;

Tax regulation of investment activities;

Regulation of investment activities by

providing financial assistance to investors and implementing appropriate credit policies;

Regulation of investment activities by implementing an appropriate depreciation policy;

Regulation of forms and conditions of financial investments;

Examination of investment projects in the development of state investment programs;

Ensuring investment protection;

Regulation of conditions for the export of capital for investment abroad.

qualitative changes in the economy. The cyclical nature of economic development (cyclical development) is an economic pattern. Cyclicity is a general form of movement, reflecting its unevenness, the change of evolutionary and revolutionary forms of progress. The most characteristic feature of cyclicity is spiral movement. Therefore, cyclicality is a form of progressive movement and economic development. ~

The central problem of the modern economy is ensuring economic growth. Economic growth is usually understood as a change in the results of the functioning of the productive forces of society and consumed (used) resources. This implies not just a quantitative increase in production volume, GDP growth, but also a structural improvement in GDP. The ultimate goal of economic growth is to increase consumption. Therefore, it is also necessary that the increase in GDP outpace population growth and be accompanied by an increase in GDP per capita.

Economic growth is a quantitative and qualitative change in the factors and results of production, ensuring an increase in the benefits of life.

The most important characteristics of economic growth

TOPIC 4

INFLUENCE OF CONSUMPTION, SAVINGS AND INVESTMENTS ON NATIONAL INCOME

QUESTIONS ON THE TOPIC:

1. Consumption and savings: relationships and differences. Marginal propensity to consume and save.

2. Investments and their functional purpose. Factors influencing the amount of investment.

3. Investment multiplier.

Consumption and savings: relationships and differences. Marginal propensity to consume and save

The most important aggregate indicator, along with aggregate demand and aggregate supply, is aggregate consumption.

Total consumption(eng. consume - C) - the total monetary expenses that the population spends on the purchase of goods and services (2/3 of the total demand). The source of consumption (C) is disposable income (DI).

But even in families with the same income and number of people, the structure of expenses is different. This is reflected in Engel's laws, which emphasize the diversity of families' behavior in using their budgets, especially consumer spending due to changes in income: low-income families and high-income families.

The level of savings depends on the level of income of the population: with an increase in income, savings grow, and with a decrease in income, they fall.

Total Savings(English save – S) – total deferred demand of households, i.e. refusal of current consumption in order to increase it in the future.

Both consumption and savings are directly dependent on the level of income and are influenced by the same factors:

DI = C + S; C = DI – S; S = DI – C; DI = C + I.

The more disposable income, the more consumption and saving.

Savings are mainly made by families whose income exceeds the average level. The poorer the family, the less it saves; The poorest have zero savings, those living in debt have negative savings.

Unlike saving, consumption exists in all families. But its lower level cannot fall below subsistence level. Consumption satisfies current needs, saving – future needs.

The relationship between disposable income and consumption is called consumption function.

The dependence of savings on disposable income is called saving function.

People's income can change (rise or fall). Therefore, it is important to know what share of this portion of income people consume and what share they save.

The share of income spent on consumption is called average propensity to consume (APC) , the share of income that is saved –average propensity to save (APS) :

APC = C/DI (%); APS = S/DI (%); APC + APS = 1.

The share, or part, of the increase (decrease) in income that is consumed is called marginal propensity to consume (MPC) is the ratio of any change in consumption to the change in income that led to the change in consumption:

MPC = DC / DDI (%).

The portion of any increase (decrease) in income that goes to savings is called marginal propensity to save (MPS) is the ratio of any change in savings to the change in income that caused it:

MPS = DS / DDI (%).

The sum of MPS and MPC for any change in after-tax income must always be equal to one, i.e. the increase in income can go either to consumption or to savings. Therefore, the consumed share (MPS) and the saved share (MPS) must absorb the entire increase in income:

MPC + MPS = 1.

The impact of income on people's propensity to consume and save is a matter of debate. For many years it has been argued that as income rises, the propensity to save increases and the propensity to consume decreases. Opponents of this point of view argued the opposite. Now, many economists believe that for the economy as a whole, MPC and MPS are relatively constant.

There are four rules of aggregate consumption:

1) consumption is determined by the function of disposable income:

C = C 1 + MPC×DI,

where C 1 is autonomous constant consumption, taking into account the influence of the interest rate and inflation expectations;

2) the increase in consumption does not exceed the increase in disposable income:

0<МРС< 1;

3) as disposable income increases, aggregate consumption will fall as households increase savings. This means that the average propensity to consume will fall, and the marginal propensity will be less than the average;

4) with an increase in disposable income, the marginal propensity to consume will also decrease, i.e. the rate of consumption growth will begin to decline from a certain level of disposable income.

If income were equal to expenses, the graph of the consumption function would take the form of a straight line located at an angle of 45 0 to the abscissa axis (Fig. 7). But since part of the income is saved, the consumption function takes the form of a curved curve, starting from some minimum level of autonomous consumption. i.e. And the graph shows the equality of consumption and disposable income. In this case, the zone to the left of point A is the negative savings sector, where consumption is higher than income, and to the right is the pure consumption sector.

Since saving and consumption are interconnected, their curves are also interconnected. The consumption curve relative to the bisector is the saving curve (Fig. 7).

In addition to income, consumption and saving are influenced by the following factors.

Economic theory. Makhovikova Galina Afanasyevna

14.3. Consumption and savings: relationships and differences. Marginal propensity to consume and save

The most important aggregate indicator, along with aggregate demand and aggregate supply, is aggregate consumption (eng. consume - C).

Consumption is the main component of total expenditure. The source of consumption (C) is disposable income (D 1).

The rest of the income goes to savings(English save – S).

Savings are that part of income that is not consumed.

Conclusion. Both consumption and savings are directly dependent on the level of income and are influenced by the same factors, or

income = savings + consumption;

consumption = income – savings;

savings = income – consumption.

Savings are mainly made by families whose income exceeds the average level. The poorer the family, the less it saves; The poorest have zero savings, those living in debt have negative savings.

Unlike saving, consumption exists in all families. But its lower level cannot fall below subsistence level. Consumption satisfies current needs, saving – future needs.

There is a distinction between average propensity to consume (APC) and average propensity to save (APS).

The relationship between disposable income and consumption is called consumption function.

The dependence of savings on disposable income is called saving function.

People's income can change (rise or fall). Therefore, it is important to know what share of this portion of income people consume and what share they save.

The fraction, or part, of an increase (decrease) in income that is consumed is called the marginal propensity to consume (MPC).

In other words, MPC is the ratio of any change in consumption to the change in income that led to the change in consumption:

The proportion of any increase (decrease) in income that goes to savings is called the marginal propensity to save (MPS).

In other words, MPS is the ratio of any change in saving to the change in income that caused it:

The sum of MPS and MPC for any change in after-tax income must always be equal to one. That is, the increase in income can go either to consumption or to savings. Therefore, the consumed share (MPS) and the saved share (MPS) must absorb the entire increase in income: MPC + MPS = 1.

The impact of income on people's propensity to consume and save is a matter of debate. For many years it has been argued that as income rises, the propensity to save increases and the propensity to consume decreases. Opponents of this point of view argued the opposite. Now, many economists believe that for the economy as a whole, MPC and MPS are relatively constant (see McConnell K.R., Brew S.L. Economics. Vol. 1. P. 208).

Until now, we have considered the dependence of consumption and savings on income. But they are also influenced by other factors.

Wealth. The more accumulated wealth in a family (real estate + securities), the greater the amount of consumption and the less the amount of savings.

Price level. An increase in the price level reduces consumption, a decrease in the price level increases it.

Expectations. If prices are expected to rise and goods become scarce, consumption rises and savings fall as people “buy ahead” to avoid higher future prices and empty shelves.

Taxation. Taxes are paid partly from consumption and partly from savings. Therefore, increasing taxes will reduce both consumption and savings. Cutting taxes will raise them.

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Consumption (C) is the individual and joint use of consumer goods aimed at satisfying the material and spiritual needs of people. In monetary form, this is the amount of money that is spent by the population on the purchase of goods and services.
The level of consumption varies in different social groups and depends on many factors, the main one of which is the income of the population. The amount of current income received (Y) predetermines the volume of consumption (C), i.e. consumption is a dependent variable on income, therefore, as income increases, consumption increases.
However, Keynes formulated the so-called basic psychological law, which characterizes the behavior of consumers who tend, as a rule, to increase their consumption with increasing income, but not to the extent that their income grows. This is explained by the desire of people to spend only part of their income on current consumption, saving the remaining part of their income in the hope that in the future it will bring greater utility than in the present.

Savings (S) is consumption deferred for future consumption or the portion of income that is not currently consumed. They are equal to the difference between income (Y) and current consumption (C), i.e.,
Y = C + S; S = Y – C.
Saving is a process that is associated with meeting production and consumer needs in the future. Savings are made by firms and households for reasons that motivate them.

Based on the equation Y = C + S, part of the income goes to personal consumption (C), and the excess takes the form of savings (S). At the same time, society's expenses can be represented, on the one hand, as demand for consumer needs (C), and on the other, for investment needs (I). Then the previous equation is transformed and has the form
Y = C + I.
The relationship between income and consumption, income and savings is called, respectively, the consumption function and the savings function.
Consumption function C = f (Y).
Saving function S = f (Y).
The actual income that determines the amount of consumption and savings is disposable income (Yd), which is determined based on current income (Y) minus tax deductions (T), i.e.:
Yd = Y – T.
The psychological factor noted by Keynes is reflected in indicators that he called the average propensity to consume and the average propensity to save.
Average propensity to consume (APC) is the share of disposable income that is spent on consumption.

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Average propensity to save (APS) is the share of disposable income that is saved.

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The consumer's response to changes in income is expressed by the indicators of the marginal propensity to consume and the marginal propensity to save.
Marginal propensity to consume (MPC) is the share of changes in consumer spending in each additional monetary unit of income that caused it.
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Marginal propensity to save (MPS) is the share of the change in savings in each additional monetary unit of income that caused it:
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Just as consumption and savings add up to income (C + S = Уd), so the marginal propensity to consume and save per monetary unit must add up to one:
?С + ?S = ?Yd;
;
MPC + MPS = 1.
Therefore: MPC = 1 – MPS, MPS = 1 – MPC.
To characterize and analyze aggregate consumption, which cannot be reduced to a simple sum of individual families, households and social groups, the following provisions of Keynesian theory are formulated, reflecting the interdependence between consumption, income and savings:
1. Consumption (C) is a function of disposable income (Yd):
C = f(Yd).
2. The value of the marginal propensity to consume (MPC) characterizes the increase in consumer spending per unit of increase in disposable income and ranges from 0 to 1, i.e. 0 3. As income grows, both consumption and savings grow; but the share of income allocated to consumption decreases in accordance with the “basic psychological law”
;
Yd^APCvAPS^.
At the same time: MPC The simplest Keynesian consumption function has the form
C = Ca + MPC (Y – T),
where C is consumer spending; Sa is autonomous consumption, the value of which does not depend on the size of the current disposable income; characterizes the minimum level of consumption required by people; MPC – marginal propensity to consume; Y – income; T – tax deductions; (Y-T) – disposable income (income after making tax deductions, Yd).
The simplest saving function has the form
S = -Ca + (1 – MPC) (Y – T)
or S = -Ca + MPS (Y – T),
where S is the amount of household savings; Sa – autonomous consumption; (1 – MPC) – marginal propensity to save; Y – advance; T – tax deductions.
For example, if the consumption function is expressed by the dependence C = 40 + 0.6Y, then the corresponding saving function is written S = -40 + 0.4Y. This interdependence between consumption and savings is depicted graphically in Fig. 5.1:
- on the abscissa axis – income values ​​(Y);
- on the y-axis – the values ​​of consumption (C) and savings (S);
- the consumption function C = Ca + MPC Y is depicted by a straight line raised by the value of autonomous consumption (Ca) above the abscissa axis with an angle to the abscissa axis at an angle?, the tangent of which is equal to the value of the marginal propensity to consume:

- on the bisector OK, at each point the value of income (Y) is equal to the volume of consumption (C), i.e.:
Y = C, which means S = 0;
- at point A (intersection of the consumption line and the bisector)
Y = C, which means S = 0.
To build a savings line, you need to project point A onto the x-axis and get point B - the first point of the savings line. At point B, with income level Y = C, the saving value is S = 0. The second point through which the saving line passes is located on the ordinate axis at zero income at point -Ca, located below the origin at a distance Ca. This means that at the income level Y = 0, consumption is equal to autonomous consumption (C = Ca) and is carried out through savings. Therefore, the -Ca point has a negative value. By connecting point B and point -Ca, we obtain the saving line: S = -Ca + MPS Y. In this case, the slope of the saving line to the abscissa axis, equal to tg?, corresponds to the value of the marginal propensity to save:

Rice. 5.1. Interdependence of the simplest Keynesian functions
consumption and savings
In addition to income, other factors influence the dynamics of consumption and savings:
1) tax increases reduce consumption and savings;
2) price increases cause different reactions in consumption and savings among population groups with different incomes;
3) economic expectations, in particular expectations of rising prices and rush demand for goods with subsequent product shortages, lead to increased consumption;
4) wealth accumulated in the household (real estate, securities): the larger its size in the family, the greater the amount of consumption and the less the amount of savings;
5) an increase in supply on the market contributes to a reduction in savings.