consumer spending + AD

Question 1

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

Answer 1

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

Question 2

MPC

Answer 2

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

Question 3

determinant ants of consumption

Answer 3

-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