Households – Spending, Saving and Borrowing

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3.2 Households Spend, save and borrow
  • Disposable income is income left after direct taxes have been paid.
  • Spending changes when income, confidence, prices and interest rates change.
  • Low-income households spend a higher share on necessities; high-income households can spend more on luxuries.
  • People save for emergencies, major purchases, education, holidays and retirement.
  • Saving is affected by income, interest rates, confidence and access to saving products.
  • The opportunity cost of saving is current consumption given up today.
  • Households borrow to buy expensive items such as houses, cars or appliances.
  • Borrowing rises when credit is available, interest rates are low and households feel confident.
  • Borrowing has risks because repayments reduce future disposable income.
  • Spending now means less saving for the future.
  • Saving now means giving up some current consumption.
  • Borrowing now increases current spending but creates future repayment pressure.

True / False

Select True or False for each statement.

1

Disposable income is income left after direct taxes have been paid.

2

Higher interest rates usually make saving less attractive.

3

Households may borrow to buy expensive items such as houses or cars.

4

Saving has no opportunity cost because money is kept for the future.

5

Consumer confidence can affect household spending and borrowing.

Practice Questions

CIE IGCSE ECONOMICS NOTES

3.0 Microeconomic Decision Makers

Practice

True / False - Trade Unions

15 questions

Question 1 of 15

One consequence of a strike for the wider economy can be an economic slowdown in critical sectors.

Question 2 of 15

One potential negative consequence of trade union activity for firms is reduced competitiveness due to higher wage costs.

Question 3 of 15

Strong trade union activity can reduce a country's international competitiveness if it forces wages above the market level.

Question 4 of 15

A hotel worker is most likely to join a craft union.

Question 5 of 15

Trade unions provide legal support to members facing unfair dismissal or redundancy.

Question 6 of 15

Trade unions help reduce income inequality in the economy by pushing for higher wages for lower-paid workers.

Question 7 of 15

For governments, a benefit of strong trade unions is that they help ensure the labour force is not exploited.

Question 8 of 15

Higher union membership in manufacturing sectors is one reason why deindustrialisation leads to declining union power.

Question 9 of 15

Trade unions can cause inflation by securing wage increases that push up firms' costs.

Question 10 of 15

Trade unions always successfully achieve their wage demands.

Question 11 of 15

A trade union can help improve communication between workers and management.

Question 12 of 15

When a trade union successfully negotiates a large pay increase, the government is always pleased with this outcome.

Question 13 of 15

Collective bargaining is when individual workers negotiate their own wages directly with management.

Question 14 of 15

Industrial action is designed to pressure employers into negotiating more favourable terms for workers.

Question 15 of 15

Government laws that restrict union activity can weaken a trade union.

Practice

True / False - Workers

20 questions

Question 1 of 20

Motivational practices that enhance worker output reduce the demand for labour.

Question 2 of 20

A salary is a payment per item produced or sold.

Question 3 of 20

Training and improved production methods can boost worker productivity and increase labour demand.

Question 4 of 20

A minimum wage has no effect on the level of unemployment in an economy.

Question 5 of 20

An increase in the retirement age tends to increase the supply of labour.

Question 6 of 20

A real estate agent receiving 1% of each property sold is an example of piece rate pay.

Question 7 of 20

When the wage rate falls, the number of workers demanded by firms increases.

Question 8 of 20

At very high wage rates, workers may choose to work fewer hours and enjoy more leisure time.

Question 9 of 20

Both geographical and occupational mobility are important for an efficient labour market.

Question 10 of 20

The individual labour supply curve is always upward-sloping at all wage levels.

Question 11 of 20

Full-time workers contribute more hours to the workforce than part-time workers.

Question 12 of 20

Teachers and accountants are typically paid a salary rather than a wage.

Question 13 of 20

Specialisation of labour and division of labour mean exactly the same thing.

Question 14 of 20

A bonus is a lump-sum payment based on performance.

Question 15 of 20

Pensions, health insurance, and company cars are examples of fringe benefits.

Question 16 of 20

Price increases in minerals and metals can boost earnings in the mining sector.

Question 17 of 20

A minimum wage set below the market equilibrium wage has no practical effect on wages.

Question 18 of 20

Geographical immobility means workers can easily move to new regions when jobs become available.

Question 19 of 20

The use of robots in car manufacturing is an example of labour being replaced by technology.

Question 20 of 20

The level of challenge in a job is a non-wage factor that can affect occupational choice.