Chapter 17: Households Flashcards
1
Q
Wealth
A
A stock of assets including money held in bank accounts, shares in companies, government bonds, cars and property.
2
Q
Disposable income
A
Income after income tax has been deducted and state benefits received.
3
Q
Rate of Interest
A
A charge for borrowing money and a payment for lending money
4
Q
How income affects spending and saving
A
As income increases, spending increases, but spending as a proportion of income decreases, and saving increases.
As income increases the pattern of spending will change.
5
Q
Dissaving
A
Consumption > Disposable Income
- Those with low or no income
6
Q
No savings or dissaving
A
Consumption = Disposable income
- Relatively low incomes which just cover living expanses
7
Q
Saving
A
Consumption < Disposable income
- Proportion of income saved increases as income increases
8
Q
Reasons for saving
A
- Specific expensive purchase
- Weddings
- For children
- Emergency
9
Q
Influences on saving
A
- Income
- Wealth
- Rate of interest
- Tax treatment of savings
- Range and quality of financial institutions
- Age structure
- Social attitudes
- Technological advancements
10
Q
Ways of borrowing
A
- Loans from a bank
-Mortage - Student loans
- Spending on credit cards
- Using an overdraft on bank account
11
Q
Reasons for borrowing
A
- “Consumption Smoothing” - borrowing at times of life when income is lower, paying it back at times when income is higher in order to maintain a constant standard of living
- Toi help buy a house
- To fund education
- Desperation
12
Q
Influences of borrowing
A
- Availability of credit
-Confidence - Rate of interest
- Social attitudes/culture
