ECONOMICS

Economics



Economics

Consumption, investment, government purchases and net exports sum up to equal the GDP. In case of the closed economy the net exports are zero and the GDP is distributed between consumption, investment, and governmental purchases.

Two -thirds of GDP belong to consumption, and economists spend much time on studying the way the households make their decision on the amount of consumption.

The disposable income of population is the most important determinant of consumption. The consumption increases as the disposable income increases, and this positive relationship is depicted in the consumption function. Although the level of consumption depends directly on the level of ...