Consumer Spending
ECO 2301
Principles of Macroeconomics
Anthony Le
November 30th, 2011
Consumer Spending Consumer spending is defined as “the goods and services bought by the households in the satisfaction of their wants and needs.” (BusinessDictionary.com). It is also known as personal consumption expenditure and is the largest part of aggregate demand or effective demand at the macroeconomic level. Why is consumer spending important in the U.S. economy? In fact, consumer spending is the single biggest determinant of the U.S. economy’s health, accounting for about two-thirds of the United States’ annual Gross Domestic Product (GDP). A decline in consumer spending could spoil the U.S. economy or certain market sectors. By
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This leaves less money to pay for discretionary purchases that help fuel economic growth. It is estimated that every $1 increase in the price of gasoline translates into an additional cost of $1,000 a year for most drivers. As a result, low income households began to feel pressures from higher energy bills, which already affected negatively discounted retailers. Long term, the pain at the pump could become more widespread. A survey released in April by the Financial Services Forum, an association of the CEOs of 20 large U.S. financial institutions, reported its members’ view escalating energy prices as the biggest threat to U.S. economic growth, ahead of rising health-care costs and terrorism. The rise in gasoline also caused the fall in auto sales. Cars and light trucks were sold at an average 11.41 annual rate in June, the slowest in a year. (Chandra)
Besides household incomes, high fuel cost and energy prices, interest rate is another key factor that determines consumer spending in the economy. Interest rate hikes have already reduced demand for mortgage refinancing and home-equity loans, two significant sources of cash that increased consumer spending in recent years. As interest rate rose, consumers most likely found it less desirable and less reasonable to borrow against the equity in their homes. As a result, they tend to put off buying luxury goods for their home, such as TVs, entertainment systems, or other goods. With the above aspects, we as consumers are
In The United States these past few years everything has gone from bad to worse dealing with spending money; which has developed economical problems, such as debt. Currently people are spending their money on things that they do not need such as iPods, MTV, and so on. They buy things to satisfy their
1. Describe two examples of important things that financial planning skills can help you do, and explain why these things are important to you personally. (4-6 sentences. 2.0 points)
Despite the real life anecdote described above, a lot of people don't understand why and how gas prices rise and fall. There's an increase in attention to gas prices when they're higher or lower than usual because that directly concerns them as a consumer. Even when gas prices are higher, consumers keep paying because there's not really an alternative out there besides buying a new environmentally friendly car. However, there's currently a much deeper problem in the United States related to gas prices. Today, in particular, gas prices are a lot less than they have been but most Americans brush it off and wonder something along the lines of ""Who is that bad for?"". I mean, fuels costs eat up a large share of earnings in the
The federal budget is known as the notorious economic tank from which money is distributed to various programs. The money used every fiscal year, which begins October 1st and ends September 30th the next year, belongs to the people. The government raises this money through taxes and they spend it on national defense, Medicare, and social security. The federal budget is an exercise in making choices, and those options will certainly affect individuals living in the U.S. These choices cause debt to pile up on the government, who is struggling to make it disappear. The deficit and debt of a government gauges how well it is being run and how well it has been run in the past. According to The Economist the national debt is the total
The United States department of commerce found out that the nation is becoming weaker. Economy had increased how consumers blow their paychecks on unnecessary items. For example, many Americans are not able to pay their rent, yet still buy play stations 4 and a 52 inch plasma TV. Most Americans spend money when going to a gas station, in game purchase or paying full price for clothes. People who pay for items in full price should be more responsible with their money. However, Alyssa Battistoni
The change in consumption patterns is due to the fact that the 80’s and 90’s saw high consumption by baby-boomers financing their purchases. As the recession began the boomers faced retirement buried under large amounts of debt. This easily brought buying to a halt and with the aging population and depleted savings it will be a more slowly rise back to normal patterns.
To begin, I believe it prudent to discuss the macroeconomic considerations of rising gas prices on both the income and substitution effect. As such, a brief but comprehensive introduction will be needed to help make inference concerning consumer behavior. To begin,
The demand of gasoline has increased steadily over the last twenty years. In 1981 the U.S. averaged 6.5 million barrels of gasoline consumption per day. By comparison, in 2004 the U.S. averaged 9.2 million barrels of gasoline consumption per day. For most of this time period, gas prices stayed relatively the same. This is because the U.S. refineries increased their production to meet the demand and maintain the equilibrium price. Also during this same time period worldwide demand for crude oil increased 27%. Crude oil producers also increased their production to meet the demand keeping prices the same.
Drivers realize that the price of gas is tied to the market value of crude oil, and has a direct impact to their daily commutes, errands, and vacations. However the reality is that the price of fuel has implications much grater than most consumers realize. Fuel prices affect nearly everything we purchase. For example, the price of farm commodities and food increase because farmers pay more for the fuel for their farm equipment and trucking firms pay more for fuel to get the commodities to market. These shipping “fuel surcharges” impact all goods
A major change that has transpired in America is the growth in consumer debts. Consumer debts have grown exponentially over the last decades due to the elimination of price controls that were once used by lenders to extend credit to consumers. “The elimination of those price controls changed the nature of consumer lending and consumer borrowing by providing an extraordinary profit opportunity to financial institutions and enhanced purchasing power to borrowers” (Lander 202). Whereas in the past, borrowing was done as a strategy for survival and used as a method for financial advancement, in recent times buying on credit and acquiring debts aimed at purchasing products for indulgence have become customary. Some feel that a consequence of this change has caused a substantial increase in consumer debts. On the other hand, others feel quite differently and believe that consumer debts are growing because of the inflation associated with the cost of necessities and the decrease in individual and family incomes. Per Christian E. Weller, a senior fellow at the Center for American Progress, “Data suggests that the run-up of debt is more of a consequence of economic necessities than of profligate spending” (583). Why are Americans going into debt more today than they did yesteryear? Despite the harm debts are causing the American society, Americans are going deeper into debts because of high interest rate loans and credit
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
Personal Budget Exercise – Excel Creating a spreadsheet track personal business expenses is an excellent use of Microsoft Excel. For this exercise, you will create a spreadsheet to enter a personal budget and track actual expenses for the year. You may choose to use real data or create a fictitious budget using a monthly income amount of $2,500. Here are suggested budget categories if you are not using a real budget. At a minimum, you must have 9 budget categories: Housing (mortgage or rent) Utilities Car payment Insurance Student Loans Food Misc. Entertainment Gas Savings
Budgeting is the systematic method of allocating financial, physical, and human resources to achieve an organization’s strategic goals. Budgets are utilized by for-profit and non-profit organizations to monitor the progress towards the goals, assist in the control of spending, and help predict cash flow for the organization.
Budget is the major financial and economic statement. The role of the budget is to keep track of the money coming in and the money going out. It is essential part of running any business effectively. It can help make a short and long term projections about financial situation, avert a financial crisis and plan for major financial changes.
The US consumed 142 billion gallons of gasoline in 2007 and the tax applied on it is 18. 4 cents on one gallon. All around the US, there are around 162,000 retail gasoline outlets. With the price of crude oil hovering around $100 a barrel, it is no wonder that concern is growing about the gas prices being so high. After all, modern economies are kept moving by this lifeblood. For instance, in the United States alone personal vehicles consume more than 140 billion gallons of diesel fuel and gasoline per year.However, there are several factors that contribute to the gas prices being so high. Given below are a few of them. Increasing Demand for Oil One of the main catalysts for the incessant rise in gas prices has been one of the most