Question

Difference between short run and long run consumption function

Answer 1

The short run consumption function has a positive intercept and a relatively low marginal propensity to consume (.6+ or so), while the long run consumption function is essentially proportional to income (as an empirical matter, no significant constant term and a much larger marginal propensity to consume, .9+ or so).

Answer 2

Explanation:

The short run consumption function has a positive intercept and a relatively low marginal propensity to consume (. 6+ or so), while the long run consumption function is essentially proportional to income (as an empirical matter, no significant constant term and a much larger marginal propensity to consume.