2.2.2 Consumption (C) Flashcards

1
Q

What is consumption

A

Spending by households on goods and services and is the main component of AD (65%)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the main determinants of Consumption

A

Interest rates - if interest rates rise, it costs more to borrow, increases OC of spending, and consumption decreases

Consumer confidence - if householders feel secure in their jobs, they are more likely to buy goods and services. Consumption increases

Wealth effect - increase in share or house prices means households are willing and able to spend more. Consumption increases

Level of employment - the higher the level of employment, the more will be spent in a country. Consumption increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly