List and explain factors that influence consumption expenditure
What will be an ideal response?
Disposable income is an important factor that influences consumption expenditure. There is a direct relationship between the two, so that an increase in disposable income leads to an increase in consumption expenditure. There also are three other factors that influence consumption expenditure: the real interest rate, wealth, and expected future disposable income. When the real interest rate falls, wealth increases, or expected future disposable income increases, consumption increases. Alternatively, when the real interest rate rises, wealth decreases, or expected future income decreases, consumption expenditure decreases.
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According to this Application, if the volatility of energy prices led to expectations of declining real GDP, investment spending at that time would tend to decrease
This relationship between the decrease in investment spending and the expected decline in real GDP would be expressed by the A) present value theory. B) liquidity principle. C) accelerator theory. D) real-nominal principle.
If the Federal Reserve lowers the required reserve ratio, people will end up taking out ________ because the interest rates ________
A) more loans; will rise B) the same number of loans; will not change C) more loans; will fall D) fewer loans; will rise E) fewer loans; are controlled by the economic conditions alone
Economic efficiency occurs when the firm produces a given output
A) by using the least amount of inputs. B) by using the maximum amount of inputs. C) at the least cost. D) at the greatest cost.
We have drawn the SAS and SP curves as straight lines for convenience. More realistically, rising output ________ the structural unemployment problem and the effect of this on wages causes those curves to ________ in slope
A) aggravates, increase B) aggravates, decrease C) alleviates, increase D) alleviates, decrease