Wealth, Microeconomics

Wealth: This is a stock of accumulated purchasing power stored up from the past.

For example, if you have a fat savings account accumulated from your past earnings, your current spending may be greater than your current income. This implies that what actually determines consumption is not nominal wealth but real wealth, which takes the price level into account.

Expectations: Households` expectations concerning future prices, money income and the availability of goods may have a significant impact on their current spending. Expectations of rising prices and product shortages tend to trigger more spending and less saving, that is, it shifts the consumption function upward and the saving function downward.

Posted Date: 1/3/2013 12:13:06 AM | Location : United States







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