ROSWAHIDA SHUBELI (BEF 7)COMPARATIVE STUDY -REVIEW ARTICLE-MACRO CONSUMPTION FUNCTION IN AN ISLAMIC FRAME WORK

In Islamic economy, saving is larger than consumption (S>C), and it similar with secular

basis. Therefore, this will increase the investment potential. The researcher has design the cogent

set of equation for concept of consumer rationality.

First, there is 2 type of consumer, neither a miser nor a spendthrift. In that case, Muslim

has practice E2. E2 are expending in the way of Allah. However, in modern economic a misery

and spendthrift is some way for consumer to satisfaction is maximixed.

Second, are hoarding view. In modern economic theory the rational consumer “will not

hoard his wealth”. On the other hand, Muslim regard to use of his saving.

In reversed position, secular economic exclusive hoarding from rational behavior to

derive satisfaction from having ability to use his money when in need. In different, Muslim

practice Zakah (Z), that will mild spur for the people to put their saving back into the circular

flow of money.

Zakah obligations on all his savings by investing only their 1/6 of their wealth, they is a

small portion. The anti-hoarding are injunction of Islam that may work.

The researcher have show the relationship between E1 and E2. There are negative

relationship. That one can be increased only by reducing the other.

He also have identify 3 factors influence the division of a Muslim’s E1 and E2. E1 are

between consumption and savings. These are (i) obligatory zakah, (ii) additional voluntary

spending in the way of Allah and (iii) restrain on consumption to shun Israf. These are expressed

as ratios of relevant variables for the purposeof analysis as Z, Z1, and β respectively.

More greater ratio of zakah (ordinary ratio of zakah are 2.5% of current income) is likely

to be the impairing effect of Z on savings. Rise in variable β will more than offset the effect of Z

and Z1 on saving.