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» Personal Loan No Credit Check, Online Economics » Keynesianismus » Topics begins with M » Marginal note rate of saving

Page modified: Wednesday, July 13, 2011 02:53:21

The marginal note rate of saving (also: marginal note savings inclination, border rate to saving) describes the portion of the income, which the private households of a national economy at the next additional (marginal) income unit save, i.e. does not consume (spend). It is fundamental for the development of the Keynesiani total model and the multiplicator.

The marginal note savings inclination can be derived from the consumer function. In a simple (model) national economy without state and foreign trade the national income can be represented as follows:

(A) \ Y=C+S mathit \! , i.e. the entire national income (Y) flows to the private sector, that it consumed (C) and saves (s).

Both the consumption and saving can be accepted thus as dependent on the national income, i.e. that with rising income also the consumption rises:

(B) <math>C= \ without C+cY, \ mbox {whereby} \ without C > 0 \ mbox {and} 0<c<1</math>

\ without C describes the so-called autonomous consumption with an income of zero (Y=0) one transacts (e.g. by the sales of fortune titles, like securities or residential property). With each income rise around a currency the consumption rises around C currencies. If the marginal note is consumer inclination c=0,85, then the consumption rises around 0,85 "€ with each income rise around 1,--"€:

C= \ without C+0,85*1= \ without C+0,85

In this case the marginal note consumer inclination is smaller than one, i.e. that during an income increase around a euro a portion of C is spent on the consumption. The remainder is saved, because

(C) \ S=Y-C mathit \! applies.

By substitution of (B) in (C) one receives the savings function

(D) S=Y \ without C+cY= \ without C+ (1-c) Y

or differently expressed: \ s=1-c mathit \!

In the example the marginal note savings inclination amounts to thus \ mathit s=1-0,85=0,15 \!.

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