4min chapter

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The Rise And Fall Of Monetary Policy - Ian Macfarlane

The Joe Walker Podcast

CHAPTER

The Disadvantages of Consumption

The rich have a lower marginal propensity to consume out of permanent income. And the poor have a higher marginal propensity to consumption, he says. The problem there is that reduced demand on the part of the poor hasn't been fully offset by the increased income of the rich because they have a low marginal propensity to spend. That puts a damp note on aggregate demand and it's not surprising people like you are interested in this kind of thing - your view of the world should be very different from someone who has spent most of their life in an economic environment with rising house prices and falling inflation.

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