consumption expenditure
Quick Summary
In economics, consumption expenditure refers to the spending by households on goods and services. This spending is a crucial component of a country's gross domestic product (GDP), typically accounting for about two-thirds of economic growth in developed nations.123
The relationship between consumer spending and the factors influencing it is known as the consumption function. These factors can include income, wealth, expectations about future income, interest rates, and personal characteristics like age and family size. Understanding consumption patterns is vital for analyzing both short-term economic fluctuations, like the business cycle, and long-term economic growth. Data on consumer spending, such as the Personal Consumption Expenditures (PCE) price index, helps economists and policymakers gauge inflation and make decisions about monetary policy.413
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- consumption
Consumption differs from consumption expenditure primarily because durable goods, such as automobiles, generate an expenditure mainly in the period when they are purchased, but they generate “consumption services” (for example, an automobile provides transportation services) until they are replaced or scrapped. (See consumer good.)
Read MoreConsumption differs from consumption expenditure primarily because durable goods, such as automobiles, generate an expenditure mainly in the period when they are purchased, but they generate “consumption services” (for example, an automobile provides transportation services) until they are replaced or scrapped. (See consumer good.)
Read More - consumptionConsumption and the business cycle
…it is the level of consumption expenditure—not the flow of consumption as defined above—that determines short-term macroeconomic prosperity (or otherwise).
Read More…it is the level of consumption expenditure—not the flow of consumption as defined above—that determines short-term macroeconomic prosperity (or otherwise).
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