Name: Abayle, Merla D. Schedule: 2:00-3:00 PM (M-W-F) BA 201 ASSIGNMENT 3 30PTS Research and define/answer the following 1. Savings - process of setting aside a portion of current income for future use, or the progression of assets aggregated in this manner throughout a given timeframe. Saving might appear as expansions in bank stores, acquisition of protections, or expanded cash possessions. 2. Consumption - the use of goods and services by households. Consumption is particular from consumption expenditure, which is the acquisition of services and products for use by households. 3. Determinants of savings - The determinants of savings are Income is the net total of the flow of payments received in a given time period; it includes large consumption and investment spending requirements and rate of return versus cost. Financial institutions for safe deposit keeping, like banks, insurance and pension funds, building societies and other institutions. Interest rates: As the reward for saving increases, so do the incentives to save. Confidence: If individuals and workers are nervous about the future, they may be inclined to save more of their income in the event of wage cuts, wage freezes, or redundancy. Inflation: If prices are rising quickly, then the real value of savings is eroded, so the incentive to save is reduced. 4. Sources of saving Private Savings • Households can set aside resources or borrow them. • Businesses can also borrow or lend. Public Savings Governments can set aside resources or borrow them. • The government deficit is the inverse of public savings, i.e., government spending minus revenues. International Savings • The current account deficit is international savings, which neighbors can set aside or borrow. 5. Marginal Propensities to Consume and Save - It refers to the proportion of an aggregate increase in income that a consumer saves rather than spends on the consumption of goods and services. 6. Non-Income Determinants of Consumption and savings The first non-income determinant of consumption and savings is Wealth is an accumulation of valuable economic resources that can be measured in terms of either real goods or money value. Second, borrowing generally refers to receiving money. In simple terms, borrowing can be illustrated as the act of receiving a certain amount of money with the intention that the receiver will have to return the same amount of money after a fixed period of time. Third, expectations refer to the forecasts or views that decision makers hold about future prices, sales, incomes, taxes, or other key variables. Fourth is the real interest rate, which is the rate of interest received (or expected to receive) by an investor, saver, or lender. Fifth is the price level: the purchasing power of money, or inflation. To put it another way, economists assess the status of the economy by examining how much individuals can buy with the same amount of money. Sixth is taxation, the technique through which a government obtains income to spend on things like public services and social payments. Seven is consumer indebtedness and the availability of credit.
