Consumption

Question 1

What are the levels of consumer spending affected by?

Answer 1

• MPC
• MPS
• APC
• APS
• Consumer confidence - influenced by employment security, real disposable income (and therefore inflation), household wealth.
• Interest Rates and the supply of credit.
• Distribution of Income.
• Actual changed in the economy, e.g: changes in house prices.

Question 2

What is the MPC?

Answer 2

• Marginal Propensity to Consume.
• The amount of an increase in earnings that is spent (change in consumption divided by change in income).

Question 3

What is the MPS?

Answer 3

• Marginal Propensity to Save
• The amount of an increase in earnings that is saved.

Question 4

What is the APC?

Answer 4

• Average Propensity to Consume.
• The total proportion of income spent (consumption divided by income).

Question 5

What is the APS?

Answer 5

• Average Propensity to save.
• The total proportion of income saved.