In chapter 9 we learn there is a relationship between consumption (dependent var

Question

In chapter 9 we learn there is a relationship between consumption (dependent variable) and disposable income (independent variable). If disposable income changes, then we move along the consumption function line to find a new level of consumption. If some other variable changes that impact the relationship (other than income) the entire line shifts. One of these variables that can shift the line is expectations.

The University of Michigan surveys hundreds of households every month to gauge their confidence in the economy.

http://research.stlouisfed.org/fred2/series/UMCSENT

http://www.advisorperspectives.com/dshort/updates/Michigan-Consumer-Sentiment-Index.php

What is/are the trend(s) in consumer confidence?  

From your own personal point of view, discuss YOUR current take (confidence) on the economy. Has it impacted your spending (consumption) and your savings habits? Why or why not? Perform some research, briefly report on the Paradox of Thrift, and tie it into your essay on confidence and saving. ( be sure toinclude the link)

Explanation / Answer

1.

Consumer confidence is showing a growing trend for the past few months after 2013. In recent months also, it is shown by the monthly data of consumer sentiments. In October, 2015, it is 92.1, beating the expectation of 79 (http://investing.com). In the month of September, 2015 consumer sentiments were at 87.2.

Positive trend in consumer confidence is due to positive expectation from the US economy and output growth. Also, systematic change in spending due to changing economic scenario has led consumer to maintain higher level of confidence.

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