Create a 1 page page paper that discusses the consumption function. The Consumption Function According to UN data, most countries have considered consumption expenditure as the most tangible element of the gross domestic product (GDP). In contrary, the vital components that explain the consumption expenditure are majorly wealth, disposable income , expected in future income the price level and the underlying interest rates.

Country

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consumption expenditure

real GDP (proxy for disposable income)

in (US. million dollars)

GDP deflator (proxy for price level)

in (US. million dollars)

lending interest rate

in (US. million dollars)

1.

Afghanistan

8,063,703,591

150

10.9

Na

2.

Albania

8,414,732,177

124

3.5

13.1

3.

Algeria

46,657,966,516

77

16.1

8.0

4.

Angola

16,610,257,666

68

26.8

67.7

5.

Antigua and Barbuda

845,962,815

114

4.3

11.4

6.

Argentina

133,117,224,547

94

8.8

6.2

7.

Armenia

4,114,120,693

114

3.2

18.0

8.

Aruba

1,767,184,358

109

4.2

11.5

9.

Australia

521,456,923,771

103

3.7

9.1

10.

Austria

223,568,537,034

96

2.0

Na

11.

Azerbaijan

6,414,194,531

90

16.1

17.0

12.

Bahamas

5,976,162,000

103

5.1

5.5

13.

Bahrain

8,589,827,775

81

13.7

7.8

14.

Bangladesh

49,389,772,358

106

5.1

14.0

15.

Barbados

3,498,300,000

108

6.6

9.2

16.

Belarus

21,397,284,824

99

18.9

11.4

17.

Belgium

279,746,803,960

96

2.4

6.7

18.

Belize

997,400,000

108

2.3

14.3

19.

Benin

3,870,536,014

107

4.4

Na

20.

Bhutan

612,218,864

125

5.9

14.0

21.

Bolivia

7,858,227,870

97

16.6

22.

Bosnia and Herzegovina

12,908,699,270

140

9.6

Country

consumption expenditure

lending interest rate

in (US. million dollars)

23.

Afghanistan

8,063,703,591

Na

24.

Albania

8,414,732,177

13.1

25.

Algeria

46,657,966,516

8.0

26.

Angola

16,610,257,666

67.7

27.

Antigua and Barbuda

845,962,815

11.4

28.

Argentina

133,117,224,547

6.2

29.

Armenia

4,114,120,693

18.0

30.

Aruba

1,767,184,358

11.5

31.

Australia

521,456,923,771

9.1

32.

Austria

223,568,537,034

Na

33.

Azerbaijan

6,414,194,531

17.0

34.

Bahamas

5,976,162,000

5.5

35.

Bahrain

8,589,827,775

7.8

36.

Bangladesh

49,389,772,358

14.0

37.

Barbados

3,498,300,000

9.2

38.

Belarus

21,397,284,824

11.4

39.

Belgium

279,746,803,960

6.7

40.

Belize

997,400,000

14.3

41.

Benin

3,870,536,014

Na

42.

Bhutan

612,218,864

14.0

43.

Bolivia

7,858,227,870

16.6

44.

Bosnia and Herzegovina

12,908,699,270

9.6

The effects of the increment and decrement of the interest rate on consumption expenditure is notable in cases of Angola and Algeria. Angola has 67.7 % interest rate against Angola which has 8% interest rate thus Angola has expenditure of 16,610,257,666 dollars and Algeria has a high of 46,657,966,516 dollars. High interest rates inhibit expenditure as exhibited from table above. The data on proxy for disposable income indicates that increase on concurrently increases the amount of consumer expenditure as exhibited in Bhutan which has a high of 125 US million real GDP (proxy for disposable income) dollars and corresponding consumption expenditure 612,218,864.

With reference to the provided data in the scatter graph it is highly fundamental to show all the determinants have influence on the expenditure. Increase in real GDP causes increase in consumer expenditure while increase in the interest rates reduces the expenditure. The data fits the theory as indicated.

References

databank.worldbank.org/data/home.

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