IN TERMS OF THE CONSUMPTION FUNCTION WHY IF THE GOVERNMENT GIVES A RICH PERSON A TAX CUT THEY MIGHT SAVE IT INSTEAD OF SPEND IT. BECAUSE ACCORDING TO THE CONSUMPTION FUNCTION,EVEN IF YOU GIVE PEOPLE IN A HIGH TAX BRACKET A TAX CUT THAT SHOULD RAISE THEIR INCOME AND THEY SHOULD, THEREFORE, SPEND THE ADDITIONAL AMOUNT OF MONEY OR MORE OF THEIR DISPOSABLE INCOME?

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The consumption function is a simplification of what happens in real life.  According to the consumption function, people have the same marginal propensity to consume no matter what their income level.  In other words, it assumes I'll spend 80 cents of my next dollar (for example) and 80 cents of...

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The consumption function is a simplification of what happens in real life.  According to the consumption function, people have the same marginal propensity to consume no matter what their income level.  In other words, it assumes I'll spend 80 cents of my next dollar (for example) and 80 cents of every dollar after that up to infinity.

But really, a person isn't going to keep spending at that rate.  Eventually, I'll run out of things to buy and I'll start spending a lower percentage of my next dollar.

But the consumption function doesn't capture that -- it's just a straight line.

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