Determinants of Consumption Flashcards
Trade deficit(imports > exports) means…
AD would be lower than total domestic demand
What are transfer payments?
money transferred from one person or group to another not in return for any goods or services e.g benefits
What is real disposable income?
Spending after tax
When may proportion of income spent fall?
as income rises
How to calculate APC? (average propensity to consume)
consumer expenditure/disposable income
define wealth
wealth is a stock of assets e.g property, shares
What does wealth result in?
greater consumer confidence
When do consumers spend more?
when they are feeling optimistic about their future and when their wages are high
What is meant by consumer confidence?
how optimistic consumers are about future economic prospects
Who tend to spend a lot of their disposable income?
the young and the elderly
What is inflation?
a sustained rise in the price level over a period of time
if people expect prices to rise….
they increase their spending sooner
define Real?
having removed the distorting effects of inflation
A fall in interest rates causes a rise in consumer expenditure because….
- Borrowing becomes cheaper
- Reduced incentive to save
- Reduced mortgage repayments
