2.2 Consumer Spending and Saving Flashcards
(5 cards)
1
Q
What is MPC?
A
The change in spending following a change in income
2
Q
Factors affecting MPC?
A
1) Real disposable income
2) Wealth Effect
3) Consumer confidence
4) Interest Rates
3
Q
What is MPS?
A
The change in saving following a change in income
4
Q
What is the Household Saving Ratio?
A
Estimates the amount of money households have available to save as a % of disposable income
5
Q
Importance of saving?
A
- Harrod-Domar Model
- Cushion for recession
- Key source of retirement incomes
