Consumer Spending
Definition
Consumer spending refers to the total amount of money spent by individuals on goods and services in an economy. It is a crucial component of aggregate demand and plays a significant role in driving economic growth.
Analogy
Think of consumer spending as fuel for the economy's engine. Just like how a car needs fuel to move forward, the economy relies on consumer spending to keep it running smoothly.
Related terms
Disposable Income: The amount of money that individuals have available to spend or save after taxes are deducted.
Marginal Propensity to Consume (MPC): The proportion of additional income that individuals choose to spend rather than save.
Consumption Function: A mathematical equation that shows the relationship between disposable income and consumer spending.
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