chapter 17- households Flashcards
definition of disposable income
disposable income is the amount of income a person has available to spend on goods and services after compulsory deductions such as income tax.
what is the relationship between the level of spending and the income earned
There is a positive relationship between the level of spending and the income earned.
definition of current expenditure
current expenditure is money spent on goods and services consumed within the current year. unlike capital expenditure, it is often recurrent, such as the spending on food, clothing, entertainment and haicuts.
definition of capital expenditure
capital expenditure is money spent by on fixed assets, such as computers and cars.
impact of direct taxation
direct taxation reduces the amount of disposable income and therefore the amount of spending upon their level of disposable income.
how is the wealth of an individual measured
the wealth of an individual is measured by the amount of assets they own minus their liabilities(amount they owe).
when does saving occur
saving occurs when a person puts away part of their income for future spending.
