Skip to main content
Back

Determinants of Consumption and Saving definitions

Control buttons has been changed to "navigation" mode.
1/13
  • Consumption Function
    Graphical representation showing how spending changes as disposable income varies, influenced by factors beyond income.
  • Disposable Income
    Amount of money available for spending or saving after taxes, directly affecting household consumption levels.
  • Wealth
    Accumulated assets such as stocks or real estate, whose unexpected changes can shift spending patterns.
  • Borrowing
    Access to funds through loans, increasing current spending but reducing future financial resources due to repayment.
  • Interest Cost
    Expense incurred from loans, decreasing future financial resources and influencing saving and spending decisions.
  • Expectations
    Beliefs about future prices or income, prompting changes in current spending or saving behavior.
  • Recession
    Period of economic decline, leading to reduced spending and increased saving as households prepare for uncertainty.
  • Real Interest Rate
    Rate adjusted for inflation, affecting incentives to borrow or save and thus influencing current spending.
  • Credit
    Ability to purchase goods or services now and pay later, often used more when borrowing costs are low.
  • Market Equilibrium
    State where supply and demand balance, influenced by shifts in consumption and saving behaviors.
  • Economic Incentives
    Factors motivating choices in spending or saving, shaped by changes in wealth, borrowing, and interest rates.
  • Marginal Propensity to Consume
    Measure of how much additional income is spent rather than saved, reflected in the slope of the spending curve.
  • Slope
    Steepness of the spending curve, indicating how responsive consumption is to changes in disposable income.