The Role of the Consumer n Consumer purchases drive the economy –GDP=C+G+Ig+Xn –C=two thirds of GDP n Savings –Ig=Business spending comes from business and consumer saving

Income from Resources n His income is determined by the quantity and quality of resources consumer has to sell n If you sell labor, the income received is wages and salaries n If you sell land, the income received is rent n If you sell capital, the income received is interest n If you sell Entrepreneurship, the income received is profit

Functional Distribution of Income

Consumer Goals

Earning More Income n Improve the quantity of resources you have to sell in the resource market. n Improve the quality of resources you have to sell in the resource market.

Uses of Income n Pay your taxes n Spend on goods and services n Save

Getting The Most From Your Income n Before you make a purchase –gather information –use advertising wisely –comparison shop n Remember that money saved means more goods and services that can be purchased n Learn to budget –set goals; know what you want –learn to prioritize –make saving a habit n Limit your use of credit –the cost of credit means fewer goods

Earning More Income n Improve the quantity and/or quality of your resources n Labor –education and/or training n Entrepreneurship –education and training

Earning More Income

The Question is... n What determines how much we spend or save? –Income –Wealth –Interest Rates –Future Expectations –Government policies

The Decision to Save and Invest n Why should you? –Prepare for the unexpected –Finance costly purchases –Additional income –Retirement –Protect against inflation

The Decision to Save and Invest n What should you consider? –How safe is it? –What are the returns? –How liquid is it?

Ways to Save and Invest n Savings accounts n Certificates of deposit n Bonds n U.S. savings bonds n Common Stocks n Mutual funds n IRAs and 401K Plans

Borrowing n Installment Plans n Charge Accounts n Credit Cards n Personal Loans n Home Mortgages n Home Equity Loans