Agents One-at-a-Time: Consumers (Households)

• In macro, everything starts with the consumer, or what we call households.

• The amount money a household owns at any particular moment is called it’s wealth – stock variable. What we are looking at here are the flow variables – the ways in which household wealth increases or decreases. In other words, the ways in which households pay out money or receive money.

• Households payout money in three ways:

• Buy goods and services in the goods markets – this flow is called Consumption and is abbreviated as “C”.

• Save money by depositing it in banks, buying bonds, or buying financial investments. This is noted as “S”.

• Pay taxes to the government. This is noted as “T”.