Skip to main content
Back

Determinants of Consumption and Saving definitions

Control buttons has been changed to "navigation" mode.
1/15
  • Consumption Function
    A graphical representation showing the relationship between total spending and disposable income, with shifts reflecting changes in non-income factors.
  • Disposable Income
    The amount of money available to households after taxes, serving as the primary driver for spending and saving decisions.
  • Wealth
    The total accumulation of assets, such as stocks or real estate, which can influence spending when its value changes unexpectedly.
  • Marginal Propensity to Consume
    The slope of the spending curve, indicating how much additional income is spent rather than saved.
  • Borrowing
    The act of obtaining funds now, increasing present spending but reducing future spending due to repayment and interest.
  • Interest Cost
    The extra amount paid when repaying borrowed funds, which reduces future financial resources available for spending.
  • Expectations
    Beliefs about future economic conditions, such as prices or income, which can prompt changes in current spending or saving.
  • Recession
    A period of economic decline that often leads individuals to reduce current spending and increase saving as a precaution.
  • Real Interest Rate
    The cost of borrowing adjusted for inflation, influencing the attractiveness of spending versus saving.
  • Credit
    The ability to purchase goods or services now and pay later, often affected by prevailing borrowing costs.
  • Saving
    The portion of disposable income not spent, often increased when future economic conditions appear uncertain.
  • Stock Prices
    The market value of shares, where sudden increases or decreases can shift overall household spending patterns.
  • Economic Downturn
    A broad decline in economic activity, typically prompting households to cut back on spending and boost reserves.
  • Future Income
    Anticipated earnings that can influence present-day spending decisions if increases or decreases are expected.
  • Supply and Demand
    A foundational concept where shifts in factors other than price or income can alter market outcomes, similar to shifts in spending behavior.