Consumption and saving

defining consumpion and saving
1. Durable Goods
2. Non-durable Goods
3. Saving
4. Disposable income
The composition of households
1. Young and old people consume more
2. However, middle age people don't consume as much
Wealth
1. Physical wealth
2. Monetary wealth
3. Wealth effect
The life cycle hypothesis
1. Explains the consumption patterns of individuals
  1. Young professional workers will take out a bigger mortgage as they will earn more in the future
  2. However, a manual worker will only take out a small mortgage as his or her salary will most likely not increase
Expectations
1. Decrease in expectations
  1. Reduces consumption
2. Increase in expectations
  1. Increases consumption
Inflation
1. Save more money (reduces consumption)
2. buy more as it will be more expensive (increases consumption)
The permanent income hypothesis
1. Permanent income
  1. Describe how agents spread consumption over their lifetimes.
The availability of credit
1. Credit
2. How much you borrow
The rate of interest
1. increase interest rates
  1. Reduces consumption
2. lowered interest rates
  1. Increases consumption
The determinants
1. The saving function
2. Average propensity to save
3. Marginal propensity to save
Consumption and income
1. Consumption function
2. Marginal propensity to consume (MPC)
3. Average propensity to consume (APC)

Resource summary

	Created by some_guy s over 9 years ago