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The colonies have a much higher wage rate than England due to a lower cost of provisions and necessities to survive, which result in a higher competition for human capital among the “masters” of the economy, which in turn raises the wage rate and increases the wage fund. The core of this phenomenon is why Adam Smith believes in the saving ...
Disposable income can only be used for saving or for consumption: = + where the subscript P denotes the private sector. Therefore private saving in this model equals the disposable income of the households minus consumption: = By this equation the private saving can be written as:
The MPS plays a central role in Keynesian economics as it quantifies the saving-income relation, which is the flip side of the consumption-income relation, and according to Keynes it reflects the fundamental psychological law. The marginal propensity to save is also a key variable in determining the value of the multiplier.
Discretionary income is disposable income (after-tax income), minus all payments that are necessary to meet current bills. It is total personal income after subtracting taxes and minimal survival expenses (such as food, medicine, rent or mortgage, utilities, insurance, transportation, property maintenance, child support, etc.) to maintain a certain standard of living. [7]
The national income identity can be rewritten as following: [2] + = where T is defined as tax. (Y-T-C) is savings of private sector and (T-G) is savings of government. Here, we define S as National savings (= savings of private sector + savings of government) and rewrite the identity as following:
Falls (increases) in income do not lead to reductions (increases) in consumption because people reduce (add to) savings to stabilize consumption. Over the long-run, as wealth and income rise, consumption also rises; the marginal propensity to consume out of long-run income is closer to the average propensity to consume.
Nothing protects you against losing value due to market conditions. However, ... If you earned $500 in interest income from a high-yield savings account in the same year, you’d owe $60 in taxes ...
The balancing item of the accounts is value added, which is equal to GDP when expressed for the whole economy at market prices and in gross terms; income accounts , which show primary and secondary income flows—both the income generated in production (e.g. wages and salaries) and distributive income flows (predominantly the redistributive ...