CameraIcon
CameraIcon
SearchIcon
MyQuestionIcon
MyQuestionIcon
Question

Which of the following factors don't affect the propensity to consume in an economy?

A
Rate of interest
No worries! We‘ve got your back. Try BYJU‘S free classes today!
B
Wealth
No worries! We‘ve got your back. Try BYJU‘S free classes today!
C
Taxes
Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses
D
Consumer credit
No worries! We‘ve got your back. Try BYJU‘S free classes today!
Open in App
Solution

The correct option is C Taxes
The factors that influence consumption and savings behaviour in the economy are as follows:
Rate of interest: Commercial bank offer a certain rate of interest on the deposits held by public and charges rate of interest on the loans given to public. When people do not want to purchase goods and services, they keep their money in the bank to earn the rate of interest. But when they want to buy goods and services, they withdraw money from the bank and lose interest in the process. In this way, the rate of interest plays an important role in influencing a persons decision to consume.
Wealth: Propensity to consume is influenced by a persons holding of wealth. People who have wealth in the form of gold, jewellery, ownership of land and building, shares and bonds etc enjoy a higher level of income generated from the wealth. Accordingly, their consumption level will be higher.
Consumer credit: Availability of consumer credit influences consumption behaviour to a large extent in the economy. There are many durable goods which consumers want to buy. But due to lack of credit facility, they are not able to buy them as they are costly items.

flag
Suggest Corrections
thumbs-up
0
Join BYJU'S Learning Program
similar_icon
Related Videos
thumbnail
lock
Tools of Fiscal Policy
ECONOMICS
Watch in App
Join BYJU'S Learning Program
CrossIcon