Consumer Spending
Total expenditure by households on goods/services.
Formula
Consumer Spending = Disposable Income × (1 − Savings Ratio)
Real World
After the Bank of England raised interest rates to 5.25% in 2023, UK mortgage holders saw monthly payments jump by hundreds of pounds, reducing disposable income and cutting high-street retail sales.
Exam Focus
Always chain the analysis: interest rate change → disposable income → consumer confidence → business revenue.
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