3.4 Spending, Saving and Borrowing: Igcse /O Level Economics
3.4 Spending, Saving and Borrowing: Igcse /O Level Economics
3.4 Spending, Saving and Borrowing: Igcse /O Level Economics
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Consumption
People will divide their disposable income between spending and saving
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What determines how much we spend?
DISPOSABLE
INCOME
Share
certificate
WEALTH
BOND
8% pa INTEREST CONSUMER
RATES CONFIDENCE
3
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Expenditure patterns and trends
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Why do our spending patterns differ?
LIFESTYLE
AGE
FAMILY
CULTURE CIRCUMSTANCES
TASTES
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Saving
US savings ratio: personal savings as a percentage of disposable income
Saving delays
consumer spending to
a later date
Withdrawing savings
to spend is dissaving
Source: US Bureau of Economic Analysis
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Why do we save?
SAVINGS
BOND
5% pa To earn income from interest
PENSION
Because of increased
SCHEME
Share
opportunities to save certificates
Fixed-interest
New tax-free
saving bonds
savings
account
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Borrowing
Consumers borrow money to finance additional
expenditure
LOAN
AGREEMENT
Amount:
$4,000
Repayment
period: 5 years
They can then make loan repayments over time from
Interest rate:
8% pa their future earnings
Personal debt is the total stock of money borrowed
and yet to be repaid by a person or a household
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What determines how much we borrow?
WEALTH
CONSUMER CONFIDENCE
AVAILABILITY OF CREDIT
© Brian Titley 2012: this may be reproduced for class use solely for the purchaser’s institute