To install click the Add extension button. That's it.

The source code for the WIKI 2 extension is being checked by specialists of the Mozilla Foundation, Google, and Apple. You could also do it yourself at any point in time.

Kelly Slayton
Congratulations on this excellent venture… what a great idea!
Alexander Grigorievskiy
I use WIKI 2 every day and almost forgot how the original Wikipedia looks like.
Live Statistics
English Articles
Improved in 24 Hours
Added in 24 Hours
Show all languages
What we do. Every page goes through several hundred of perfecting techniques; in live mode. Quite the same Wikipedia. Just better.

Absolute income hypothesis

From Wikipedia, the free encyclopedia

In economics, the absolute income hypothesis concerns how a consumer divides his disposable income between consumption and saving.[1] It is part of the theory of consumption proposed by economist John Maynard Keynes. The hypothesis was refined extensively during the 1960s and 1970s, notably by American economist James Tobin (1918–2002).[2]


Keynes' General Theory in 1936 identified the relationship between income and consumption as a key macroeconomic relationship. Keynes asserted that real consumption (ie adjusted for inflation) is a function of real disposable income, which is total income net of taxes. As income rises, the theory asserts, consumption will also rise but not necessarily at the same rate.[2] When applied to a cross section of a population, rich people are expected to consume a lower proportion of their income than poor people.

The marginal propensity to consume is present in Keynes' consumption theory and determines by what amount consumption will change in response to a change in income.

While this theory has success modeling consumption in the short term, attempts to apply this model over a longer time frame have proven less successful. This has led to the absolute income hypothesis falling out of favor as the consumption model of choice for economists.[3]


The model is


See also


  1. ^ R. L., Thomas (1985). Introductory econometrics, theory and applications. London: Longman. p. 160. ISBN 058229634X. OCLC 10348689.
  2. ^ a b "absolute income hypothesis Archived 2019-04-21 at the Wayback Machine", Retrieved 2019-03-01
  3. ^ Kuznets, S. (1946) National Income: A Summary of Findings, New York: National Bureaus of Economic Research.


  • Keynes, John M. The General Theory of Employment, Interest and Money. London: Macmillan, 1936.
This page was last edited on 8 May 2021, at 22:41
Basis of this page is in Wikipedia. Text is available under the CC BY-SA 3.0 Unported License. Non-text media are available under their specified licenses. Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc. WIKI 2 is an independent company and has no affiliation with Wikimedia Foundation.