Exam code: 0455 & 0987
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Define disposable income.
Disposable income is the amount of income households have left after paying taxes and receiving any transfer payments.
What are the three main factors that influence consumption in an economy?
The three main factors that influence consumption are income, interest rates and the level of confidence in the economy.
When increase, consumption also increases because households have more money left after taxes.
When disposable incomes increase, consumption also increases because households have more money left after taxes.
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Define disposable income.
Disposable income is the amount of income households have left after paying taxes and receiving any transfer payments.
What are the three main factors that influence consumption in an economy?
The three main factors that influence consumption are income, interest rates and the level of confidence in the economy.
When increase, consumption also increases because households have more money left after taxes.
When disposable incomes increase, consumption also increases because households have more money left after taxes.
How do interest rates affect household consumption?
Higher interest rates increase the cost of borrowing and loans, so consumption decreases. Lower interest rates make borrowing cheaper, so consumption increases.
A population with a higher proportion of elderly people will likely see increased spending on and pensions.
A population with a higher proportion of elderly people will likely see increased spending on healthcare and pensions.
How do interest rates influence the level of saving in an economy?
Higher interest rates encourage saving by increasing returns, while lower interest rates discourage saving and make spending more attractive.
Cultures that value tend to have higher savings rates, while consumption-oriented cultures have lower savings rates.
Cultures that value saving tend to have higher savings rates, while consumption-oriented cultures have lower savings rates.
How does consumer confidence affect saving behaviour?
High consumer confidence leads to less saving and more spending, while low confidence increases precautionary saving.
Define security in the context of borrowing.
Security is an asset or guarantee that a borrower provides to a lender when taking out a loan, which can be claimed by the lender if the borrower fails to repay the debt.
True or False?
Higher disposable income increases a household’s ability to borrow.
True.
Lenders see higher disposable income as lower risk, making it easier for households to repay loans and qualify for credit.
Which age group is most likely to borrow for education or to buy a home?
Younger people are most likely to borrow for education or to buy a home.
In cultures where borrowing is widely accepted and credit is available, the level of borrowing is .
In cultures where borrowing is widely accepted and credit is available, the level of borrowing is higher.