Extending the household sector of MacroLab to improve the explanation of trend in personal saving rate in the U.S.

Abstract

MacroLab (Wheat 2007 a) is a system dynamics model of the U.S. economy. It was developed to improve understanding of macroeconomics. In particular, it helps students to learn about the dynamics of an economy. This study takes a new look at the concept of consumption and saving behavior in private sector, and evaluates the household sector of MacroLab. The present paper seeks to extend the household sector of MacroLab by adding the effect of price level on people's consumption and saving behavior based on categorizing their consumption to Essential" and Discretionary". The extended model generates more accurate consumption and saving behavior than the outcome of household sector of MacroLab compared to the historical data.