Households
Households
- A household chooses how much to spend, save and borrow.
- saving = income not spent now; borrowing = spending money you'll repay later (with a charge).
Practice
Saving is:
Saving is income kept for later; borrowing is spending money you must repay.
What changes these choices
- income — more income → more spending and saving.
- interest rates — higher rates → saving more rewarding, borrowing dearer → more saving, less borrowing.
- confidence — feeling secure → spend/borrow more; worried → save more.
Practice
A rise in interest rates usually makes households:
Higher rates reward saving and make borrowing dearer, so saving rises and borrowing falls.
Practice
When people feel confident about their jobs and the future, they tend to spend and borrow more.
Confidence raises spending and borrowing; worry raises saving.
You've got it
Key idea
- a household decides how much to spend, save, borrow
- higher interest rates → more saving, less borrowing
- higher income and confidence → more spending