Answer to Question #213632 in Macroeconomics for INGRID

Question

Why literature describe the keynesian consumption function as a short run model?

Answer 1

Consumption is the act of humans completing the utility of things and services to satisfy their desires. On the other hand, the consumption function depicts the link between a country's aggregate income and consumption. One's income and proclivity mostly determine consumption to consume. So, in the short run, consumption is influenced by income. Again, according to Boug (2021), the amount of aggregate consumption is mostly determined by the amount of collective income. As a result, as income rises or falls, consumption rises or falls as well. In the near run, consumption is a function of income.

References

Boug, P., Cappelen, Å., Jansen, E. S., & Swensen, A. R. (2021). The consumption Euler equation or the Keynesian consumption function?. Oxford Bulletin of Economics and Statistics, 83(1), 252-272.