2.2.2 - Consumption

Question 1

What Is Consumption?

Answer 1

The spending on consumer goods and services over a period of time.

Question 2

What Is Disposable Income?

Answer 2

The money consumers have left to spend after taxes have been taken away and any state benefit has been added.

Question 3

What Happens To Disposable Income If Taxes Increase?

Answer 3

Decreases.

Question 4

What Happens To Consumption When Savings Decrease?

Answer 4

Increases.

Question 5

Describe The Influence Of Changes To Interest Rates On Consumer Spending?
(2 Points)

Answer 5

~ Changes to the base rate could cause commercial banks to change lending and saving rates they offer customers.

~ A change in the interest rate can also change the level of consumer spending and saving.

Question 6

Describe The Influence Of Changes To Consumer Confidence On Consumer Spending?
(2 Points)

Answer 6

~ The stronger the economy, the higher the consumer confidence.

~ Consumption increases, savings decrease.

Question 7

Describe The Influence Of Changes To Wealth On Consumer Spending?

Answer 7

If consumer wealth increases, consumption usually decreases.