I’ve recently been trying to work out a rough estimation of autonomous and induced consumption of the United States in 2008, but have incurred a problem in the process. The data I’m using is from http://www.euromonitor.com/factfile.aspx?country=US. The relevant information is as follows:
Annual disposable income (US$ million): 10,424,621.99
Consumer expenditure (US$ million): 10,053,102.30
I also know that the marginal propensity to consume of the USA in 2008 was around 0.98-0.99, so using the consumption function, consumption spending should be approximately the following:
Even before taking into account autonomous consumption, induced consumption is larger than the recorded consumption spending from the statistics site I’m using so something must be wrong. Has anyone here got any insight on this?
The household saving ratio of the USA has been close to 0 for most of this decade. Indeed, using the data, for induced consumption to even meet the total consumption spending figure used by the site, the MPC would have to be around 0.96 (4% saving rate).
The World Economic Factbook makes no reference to any margin of error in the data it uses unfortunately, but you’re right in that erronous information may be the problem. Nafziger estimates that for the top quality GDP estimations the margin of error is about 6% - so I’d suppose that all macroeconomic estimations would have a similar m.o.e considering that they use similar quantitative data.
Annual disposable income (US$ million): 10,424,621.99
High Estimate: 11,050,099.31 - Low Estimate: 9,799,144.67
Consumer expenditure (US$ million): 10,053,102.30
High Estimate: 10,656,288.44 - Low Estimate: 9,449,916.16
The MPC would allow for the consumption function outcome to fit within this range, so perhaps I’ve answered my own question.
Thanks for reminding me about the possibility of error, I assumed infallibility of the data I was using…