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Why is consumption so much more stable over the business cycle than investment?
Wiki User
∙ 13y ago
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.
Wiki User
∙ 13y ago
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What are the determinants of investment?
1. Revenue: Economic Growth and Business Cycle 2. Cost: Interest rates and Taxes 3. Expectation: Stable economic and political condition of any country.
Historical evidence for the U.S. economy indicates that?
changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.
What keeps business cycle going?
Investment, interest rate and credit, consumer expectations, external shock
What are problems associated with the business cycle?
high level of inflation,unemployment,random shocks,changes in taste,decrease in consumption and lack of new capital
Business cycles occur in free enterprise systems because?
A business cycle is the monitoring of the ups and downs within a market. Free enterprise is subject to business cycles because of the many economic decisions about factors including prices, production, and consumption that are based on various markets within the area of free enterprise.
What are the determinants of investment?
1. Revenue: Economic Growth and Business Cycle 2. Cost: Interest rates and Taxes 3. Expectation: Stable economic and political condition of any country.
Historical evidence for the U.S. economy indicates that?
changes in real GDP over the business cycle are largely attributable to changes in investment over the business cycle.
Which part of real GDP fluctuates most over the course of the business cycle?
investment expenditures.
What keeps business cycle going?
Investment, interest rate and credit, consumer expectations, external shock
What has the author Tom Kornstad written?
Tom Kornstad has written: 'Empirical life cycle models of labour supply and consumption' -- subject(s): Business cycles, Consumption (Economics), Econometric models, Human Life cycle, Labor supply, Life cycle, Human, Product life cycle, Supply and demand
What are problems associated with the business cycle?
high level of inflation,unemployment,random shocks,changes in taste,decrease in consumption and lack of new capital
What activity is an effective solution for keeping the oxygen cycle stable?
Replanting trees in deforested areas can help keep the oxygen cycle stable.
PGA is the first stable product of?
PGA is the first stable product of The Calvin Cycle of photosynthesis.
Business cycles occur in free enterprise systems because?
A business cycle is the monitoring of the ups and downs within a market. Free enterprise is subject to business cycles because of the many economic decisions about factors including prices, production, and consumption that are based on various markets within the area of free enterprise.
What is the role of needs in business cycle?
explain the role of needs in the business cycle
What are the components of business cycle?
The components of the business cycle is Prosperity, Recession, and depression.
Business cycle of the Philippines since 1946 to 2008?
what is definition of business cycle in the phillipines
