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What crop is raised for income rather than substinence?
Crops that are raised for income purposes rather than to be consumed by the person who raises them are called cash crops; there are many examples of these, and any crop can be a cash crop if you are growing a larger quantity than you need for your personal consumption.
Why is consumption so much more stable over the business cycle than investment?
consumption, especially of non-durable goods is stable because people need to consume many resources they buy on a day to day basis. In a recession, people still need to eat. The second reason that consumption is stable is more subtle, it is the permanent income hypothesis, which states that a person will spend a consistent amount of money throughout their lifetime, not based on current earnings, but based on the income they will make in their lifetime. Investment is volatile in a recession because firms do not feel comfortable expanding in a recession because they feel that the returns on the investment would not surpass the investment.
Psychological law of consumption?
Generally it is observed that when income increases, consumption also increases but by a less proportion than the increase in income. Suppose the total income of the community is 10 crore and the consumption expenditure is also Rs 10 crore. In that case, there is no saving and investment. Further the income increases to Rs.15 crore. Then, consumption also increases, but not to the extent of Rs15 crore. It may increase to Rs14 crore and Rs 1 crore constitutes the savings. This savings create a gap between Income and Consumption. This gap is in conformity with Keynes Psychological law of consumption, which states that, when aggregate income increases, consumption expenditure shall also increase but by a somewhat smaller amount". This law tells us that people fail to spend on consumption the full amount of increment in income. As income increases, the wants of the people get satisfied and as such when income increases they save more than what they spend. This law may be considered as a rough indication of the actual macro - behaviour of consumers in the short run. This is the fundamental principle upon which the Keynesian consumption function is based. It is based upon his observations and conclusion derived from the study of consumption function. This law is also called the fundamental law of consumption. It consists of three inter related propositions: # When the aggregate income increases, expenditure on consumption will also increase but by a smaller amount. 2. The increased income is distributed over both spending and saving. 3. As income increases, both consumption spending and saving will go up. These three prepositions form Keynes psychological law of consumption. As consumption expenditure progressively diminishes when income increases, a gap between income and expenditure arises. This tendency is so deep rooted in people's habits, customs, and the psychological set up that it is difficult to change in the short run. Hence, it is impossible to raise the propensity to consume of the people so as to increase the national output, income and employment. Increasing the volume of investment in an economy can only fill up the gap between income and Consumption.
What are commonly proposed alternatives to income tax?
proposed alternatives to the income tax include the value-added tax and national sales taxes, two taxes for which the tax base would be consumption rather than income. Another alternative is the flat tax
Which is not a type of investment?
Investment is anything that is purchased with money and is expected to produce some profit or income in future. Consumer purchases such as cars, TVâ??S, beds among many others are therefore, not investments. Anything that generally depreciates in value, rather than appreciating is not an investment.
Why would increasing the government budget deficit decrease investment spending?
Aggregate Demand = Consumption (C) + Investment (I) + Government Spending (G) + Exports (X) - Imports (M) Income = Consumption (C) + Savings (S) + Taxes (T) Aggregate Demand = GDP = Income C + S + T = C + I +G + (X - M) so I=S+(T-G)+(M-X) If T is less than G you will have a budget deficit. Which would make (T-G) negative and decrease investment.
If the consumption is greater than current income how can be sustained?
When consumption is greater than current income, the situation in itself is non-sustainable. However, if the situation is considered temporary, financing is usually used to sustain the business until they are able to generate the cash flows necessary to cover consumption.
Unearned income?
Money earned from means other than employment or self-employment, such as interest income, dividend income, capital gains on investment, rental income, etc.
Why is a current account surplus equivalent to foreign investment?
A country where income is greater than spending, has saving greater than investment, and a current account surplus. The excess of income over spending must be balanced by foreign investment, so there will be a financial account deficit to match the current account surplus.
Suppose a family's consumption exceeds its disposable income This means that its?
Apc is greater than 1
What is the meaning of deffered income?
When you have earned income but will get paid in the future rather than upon earning it.
What is producing capital goods rather than producing final goods is known as what?
Investment
