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Why is investment spending more volatile than consumption spending?
Wiki User
∙ 12y ago
It is more risky.
It is long term and irreversible.
It involves large amount of money.
Jz guess.....
Wiki User
∙ 12y ago
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What is a Change in consumption due to a change in real income?
The more you make the more you spend. Spending equals 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.
What is the income consumption curve?
Income Consumption curve (icc) is a curve which determine the consumption of a consumer base on in his/her income When Income is High, Spending Capacity increases, higher the spending capacity - more the demand. Thus converse to the original demand theory which says, PRICE determines Demand, ICC theory says, INCOME of a PERSON determines the Demand for a Product
Why does GDP equal to total expenditure?
GDP is the total output by an economy. if GDP increases, it will generate more ecnomic activity, more jobs and therefore increased wages for people. With these wages, people can increase their total expenditure. Total expenditure = consumer consumption + investment + government spending + net exports with more money from income, individuals will spend more on consumption and money which was saved in banks can be used to invest in firms. the taxes people pay will go to the government to spend. this will increase total expenditure. If GDP is low, then theres less acitivity in the economy, less jobs, less wages, less taxes, more government spending and a higher deficit and therefore total expenditure decreases.
Why does deman curve slopes downward?
1. Wealth effect: Price down means consumers are wealthier than if the price was higher, so they buy more. 2. Interest rate effect: As price goes down, people save more money. This increases the supply of money for loans, which in turn decreases their cost, which in turn drives up investment spending (GDP = C + I + G + NX, remember, consumption + investment + government spending + net exports). 3. Because the interest rate is lower as price goes down, investors will be more likely to invest in other countries (which will be more likely to have relatively higher interest rates), which drives up the NX part of the equation.
What is a Change in consumption due to a change in real income?
The more you make the more you spend. Spending equals consumption
Why is it necessary that tourism business are updated?
Tourism gives a country additional income in form of export receipts. When tourists come in to a country they bring in money to buy goods and services. As the demand increases, suppliers will have to increase output to compensate so they hire more people creating more jobs. Now local people have more money to spend so consumption spending increases. You see GDP = Consumption spending + Investment by businesses + Government spending + (Exports - Imports)
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.
Which is a riskier investment corporate bonds or technology stocks?
Tech Stocks will be generally more volatile and thus considered more risky.
What is the income consumption curve?
Income Consumption curve (icc) is a curve which determine the consumption of a consumer base on in his/her income When Income is High, Spending Capacity increases, higher the spending capacity - more the demand. Thus converse to the original demand theory which says, PRICE determines Demand, ICC theory says, INCOME of a PERSON determines the Demand for a Product
Is ethylamine more volatile than methylamine?
Ethylamine is more volatile than methylamine.
How do you determine less volatile and more volatile?
The higher the boiling point, the less volatile. And vice versa.
Is ethanol more volatile than acetone?
Acetone is more volatile than ethanol.
Is gasoline volatile?
Gasoline is more volatile than diesel.
Why does GDP equal to total expenditure?
GDP is the total output by an economy. if GDP increases, it will generate more ecnomic activity, more jobs and therefore increased wages for people. With these wages, people can increase their total expenditure. Total expenditure = consumer consumption + investment + government spending + net exports with more money from income, individuals will spend more on consumption and money which was saved in banks can be used to invest in firms. the taxes people pay will go to the government to spend. this will increase total expenditure. If GDP is low, then theres less acitivity in the economy, less jobs, less wages, less taxes, more government spending and a higher deficit and therefore total expenditure decreases.
Who require more temperature for easily evaporation its volatile liquid or non volatile liquid?
A volatile liquid evaporates easily and so requires lesser temperature. A non-volatile liquid requires more temperature to evaporate
Why does deman curve slopes downward?
1. Wealth effect: Price down means consumers are wealthier than if the price was higher, so they buy more. 2. Interest rate effect: As price goes down, people save more money. This increases the supply of money for loans, which in turn decreases their cost, which in turn drives up investment spending (GDP = C + I + G + NX, remember, consumption + investment + government spending + net exports). 3. Because the interest rate is lower as price goes down, investors will be more likely to invest in other countries (which will be more likely to have relatively higher interest rates), which drives up the NX part of the equation.
