The formula for today's consumption is defined as:

$$C = Y - T -S^P$$

That being said the consumption of tomorrow is:

$$C' = Y' - T' + S^P(1+r)$$

Could anyone possibly explain to me why the saving becomes positive in tomorrow's consumption formula?

Thank you very much for your help

• As an economist, I do not like this phrase, but "a penny saved is a penny earned." – Giskard May 21 at 20:44
• Thank you for your quick reply, so $𝑆𝑃(1+𝑟)$ is the amount saved today (if this is the case how come)? – Fozoro May 21 at 20:46
• Do these formulae relate to a 2-period model (in which there is no point in saving in period 2)? If there are more than 2 periods then one might expect $C' = Y' - T' + S^P(1+r) - S'$. – Adam Bailey May 21 at 21:29