The Direction of Consumption

[Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>]

Assume income =/= output.

If the current relations are given by:

  1.1)    Output = Consumption + Investment

  1.2)    Consumption = Output - Investment

and by:

  2.1)    Saving = Income - Consumption

  2.2)    Consumption = Income - Saving


Qualify 1.2 as consumption directed by investors (Ci) and
2.2 as consumption directed by savers (Cs).

When the inflation rate is zero, consumption directed by investors is equal
and opposite to consumption directed by savers:

          Ci + Cs = 0


When the inflation rate is greater than zero, consumption directed by
investors is greater than the consumption directed by savers:

          Ci + Cs > 0


When the inflation rate is less than zero, consumption directed
by investors is less than the consumption directed by savers:

          Ci + Cs < 0


Comments?

Harry Veeder