Abstract
The author examines traditional consumer behaviour theory to determine how consumers might be expected to respond to changes in actual and expected price levels, net wealth and interest rates. it is found that actual saving behaviour has not conformed to these expectations. The author suggests reasons why this has been so and why saving ratios have risen. He concludes that some of the assumptions of traditional theory cannot be justified and that it omits several important determinants of consumption Including lags, imperfect knowledge, inability to acquire inflation hedges, liquidity, debt levels, “forced” saving, the desire to maintain real wealth and the price level.
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