households Flashcards
people can earn income from:
- interest on savings
- rent earned from leasing property
- dividends
- profit earned from running a business
what is current expenditure
Current expenditure is
money spent on goods and
services consumed within
the current year. Unlike
capital expenditure, it is
often recurrent
what is disposable income
Disposable income is the
amount of income a person
has available to spend on
goods and services after
compulsory deductions
such as income tax
what is a saving
Saving occurs when a
person puts away part of
their current income for
future spending
The level of savings is affected by the following factors:
- Age of a person
- Attitude to saving
- Consumer and business confidence
- Interest rates
- Income levels
what is capital expenditure
Capital expenditure is
money spent by on fixed
assets
The reasons for saving include the following:
- A person decides to sacrifice current spending so that they have funds to spend
in the future - A person may choose to save a portion of their income in a bank or other
fi nancial institution in order to earn interest. Banks also provide a secure place
for depositing savings
what is borrowing
Borrowing occurs when
an individual, fi rm or the
government takes out a
loan, paying it back to the
fi nancial lender over a
period of time, with interest
payments.
Individuals and firms may borrow for different reasons, including:
- to fund expensive items such as a car or an overseas holiday
» to fund private and tertiary education
» to purchase property or land, such as a factory, office or home
» to start up a new business
Factors that affect the level of borrowing in an economy include the following:
- interest rates
- confidence levels
- availability of funds
- credit cards
-store cards - wealth
