Access to credit / Financial Deregulation
Bookmark this page

Financial liberalisation of financial and capital markets in 1980s. E.g. relaxation of controls on mortgage lending, and deregulation to enable consumers to gain easier access to credit markets – UK a credit liberalised country. This has boosted spending, esp. on consumer durables which are credit financed, such as cars & household electrical goods.

The Savings Ratio

Definition:

Savings Ratio = the difference between personal disposable income (PDI) and consumption,

expressed as a percentage of PDI.

But several practical & conceptual problems: e.g. it’s the difference between 2 large & fairly inaccurate aggregates – inevitably inaccurate itself: (up to 20% either way says gov.). (Personal Sector: households, unincorporated businesses, non-profit bodies and life assurance & pension funds – so will be affected by stock appreciation)

Largely unanticipated swings in savings over the past 20 years imply that consumption function less stable than Keynes thought. 85-88: consumption consistently underestimated. 89-92: consumption consistently overestimated. – policy errors, welfare losses…

Other Notes in this Category

1. Access to credit / Financial Deregulation
2. Consumption
3. Consumption and Saving Exam Questions
4. Determinants of Consumption
5. Inflation
6. Interest Rates and Monetary Policy
7. Key Points
8. Other Theories of the Consumption Function
9. Problems with Consumption Functon
10. Unemployment/Consumer Confidence/Uncertainty
11. Wealth Effect – Asset Prices, Debt Burden, and Windfall Gains

Didn't find this useful?

• Visit Coursework.Info for over 14,000 GCSE, A-Level and University Essays