consumer spending + AD Flashcards

1
Q

what is consumption and how much of ad does it account for in the UK

A

total spending by households in goods and services in economy, accounts for 66% of UK GDP

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2
Q

MPC

A

marginal propensity to consumer, willingness of households to spend any additional income earnt

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3
Q

determinant ants of consumption

A

-level of disposable income: fall in national insurance, income tax, cut marginal rate of income tax, increases MPC and consumption
-cut in IR: cost of borrowing falls, encouraging consumption. rate of return on saving increases, reduces saving. monthly repayments fall if variable rate mortgages or tracker rate mortgages
-availability of credit: if low, it reduces impact of borrowing as banks not willing to lend
-confidence: high, higher MPC. job prospects or level of unemployment
-asset prices: link to wealth and how wealthy they feel, if feel wealthy they are more likely to consume ( house prices, share prices)
-household indebtedness: if it is large, individuals will save

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