Chapter 17 (consumtion Also)

Question 1

Pessimistic view

Answer 1

You save to face unexpected spending or a loss of your income
Example: Might lose your job

Question 2

Constructive view

Answer 2

You save to be able to obtain a certain amount of money or to construct your future.
Example: To buy a house/ send your children to university.

Question 3

Opportunistic view

Answer 3

The saver expects to be able to buy something with his/her money.
Example: A new IPhone

Question 4

Sources of income

Answer 4

Rent
Wages and salaries
Interest
Profit
Dividends
Welfare

Question 5

Gross income

Answer 5

Before taxes (your income of your total amount of income) before contributing to society by taxes.

Question 6

Disposable income

Answer 6

It’s the compulsory deduction in the amount of income a person has available to spend on goods and services. e.g. income tax.

Question 7

Influence on household savings

Answer 7

Age of the person
Attitude to saving
Consumer and business confidence
Interest rates
Income levels

Question 8

Influence on households borrowing

Answer 8

Interest rates
Confidence levels
Availability to funds
Credit cards
Store cards
Wealth

Question 9

Reasons to borrow?

Answer 9

To fund expensive items (house/car)
To fund private and tertiary education
To purchase a property (house/factory)
To start a new business
To fund large projects

Question 10

Influence on household spending

Answer 10

Income
Interest rates
Age
Inflation
Confidence level
Size of household

Question 11

What happens if the interest rates are high?

Answer 11

Consumers are less likely to borrow money or buy on credit card because it’s expensive and spending will fall