Is consumption spending larger and more volatile than investment spending? Provide a brief explanation.

Is consumption spending larger and more volatile than investment spending? Provide a brief explanation.

 

Answer:

Consumer spendings mostly inclused, spendings on necessities such as housing, food, etc. which is more volatile. On the other hand investment spendings are seeing the economic perspectives of a business and calculating the rate of return of capital over a period of time. Hence, these can be less volatile or volatile only for short to medium term. Also consumption spendings are because of constant proportion of GDP while Investment spendings are related to change in GDP.

Asked on February 15, 2018 in economics.
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