Macroeconomics, 2nd Edition by Pearson

CONSUMPTION

63

That consumption demonstrates smoothness in its pattern calls for an

explanation. Also, an implication of a Keynes-type consumption function is

that savings rates tend to rise over time as shown in Figure 3.2. Simon Kuznets

6

tested the data for proof of this and found instead that in the United States, for

over the period of a century, the savings rate had not risen. This contradicted

what the Keynesian consumption function was proclaiming. An important

research area in economics was to find an explanation for the smoothness in

consumption and static nature of savings rate. Two economists who led the

research in this ...