Individual spending and saving section is a very important section for Paper 2 in IGCSE Economics. Usually there is a question on this topic every year.
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Factors affecting individual expenditure
- Level of income/wealth: An individual with high income will usually spend more than a person whose income is less.
- Family size and commitments: An individual with a large family will end up spending more from his income.
- Rates of interest: When interest rates are high people usually spend less as saving are a more attractive option.
- Availability of/knowledge about savings schemes
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Factors affecting Saving
- Interest rates: Higher interest rates will encourage people to save more.
- Availability of appropriate savings schemes: With more options to save money people will be attracted to save more
- Advertising of/knowledge about what is available at financial institutions
- Confidence/trust in financial institutions
- Size of real disposable income: Disposable income is the income left after paying taxes. Thus more money left in pockets will encourage people to save more.
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