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21 Cards in this Set
- Front
- Back
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% Income spent on housing
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-Low income backgrounds => v. high % (c. 100%)
-Middle income backgrounds => moderately high % -High income backgrounds => medium % |
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Why (housing)?
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-Low => Rent is a large % of monthly bills
-Middle => Probably have mortgage -High => Mortgage payed off or quite low % |
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% Income spent on food
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-Low => Quite high %
-Medium => Low % -High => v. low % |
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Why (food)?
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-Low => Not much money
-Medium => More money -High => The most money But fairly fixed cost of food |
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% Income spent on leisure/entertainment
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-Low => v. low %
-Medium => Medium % -High => Medium % (more than medium income) |
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Why (leisure)?
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-Low => Most money going into rent/food etc. => May have to borrow just to get by
-Medium => Left over money -High => More left over money |
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% Income saved
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-Low => V. low %
-Medium => Medium % -High => High % |
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Why (saving)?
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-Low => Scrape by each month => None left over
-Medium => Save what they don't spend on entertainment after bills etc. -High => As for medium, but with more money |
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Income
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-Low => Spend most/all
-Medium => Spend most (ish) -High => Spend some |
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Savings
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-Low => None/v. little
-Medium => Save a bit -High => Save & invest 'some' |
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Borrowing
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-Low => Might have to borrow just to get by
-Medium => For big ticket items/consumer durables -High => Probably don't borrow |
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Spending is...
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...exchanging money for goods/services.
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Saving is...
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...setting money aside for FUTURE USE.
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Borrowing is...
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...taking money from another party WITH THE INTENTION OF PAYING IT BACK.
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Why do we spend?
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-To fulfill basic needs
-To fulfill wants -To increase wealth in the future (consumer durables) |
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Consumer durables are...
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...goods which last for a long time.
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Why do we save?
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-For financial security in the future
-To avoid borrowing (interest) -If we want something in the future, not now |
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Savings ratio=
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Savings/total income
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Saving depends on...
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...interest rates. Increase interest => Increased savings ratio => Increased savings
...inflation. Increase inflation => Decreased savings ratio => Decreased savings ...cultural background. |
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Why do we borrow?
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-To spend more than our income allows
-To buy big ticket items -To buy consumer durables |
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Borrowing depends on...
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...interest rate. Increased interest rate => Decreased borrowing
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