Consumer Spending

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Consumer Spending
Dr. Robert R. Reed III University of Kentucky ECO
412 Monetary Economics

• Brandyn Beavers, Rebecca Brooks,
• Eric Gavitt, Amy Meadows, and Josh Smith

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Billy Gillispie is coming to UK
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The 3 Categories

• Durable Goods
• Ex automobiles, appliances, furniture
• Nondurable Goods
• Ex food, clothing, gasoline
• Services
• Ex recreation, transportation, medical

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Where Data is From

• Bureau of Economic Analysis
• Census Bureau
• Business and Labor Statistics
• Private sources
• Consumer Expenditure Survey (CE)

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Consumer Expenditure Survey

• 60,000 households annually
• Diary Survey
• Two, one week periods
• Groceries, snacks, impulse buys.
• Interview Survey
• Major, repeated purchases
• Cars, rent, utilities.

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Total Personal Consumption Expenditures between
2004 - 2006
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Change in Personal Consumption Expenditures
(Percent)
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Break down of Consumption
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PCE and Components
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Personal Consumer Expenditures as a Percent of GDP
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Personal Consumption Expenditures mapped against
Corresponding GDP
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Monetary Policy Recommendation

• Decrease Federal Funds Rate by 1/4
• Boost the declining housing sector
• Lower mortgage rates
• Fend off future recession
• Boost consumer expenditures
• Increase demand for liquidity

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Test Questions Yay!

• 1) Services encompasses what percent of total
  consumer expenditures?
• a) 15
• b) 67
• c) 60
• d) 28

Correct Answer C
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• 2) Between 2004 and 2006 personal consumer
  expenditures have (as a whole)
• a) Increased
• b) Decreased
• c) Remained constant
• d) All of the above

Correct Answer A
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• 3) What are the three main categories of consumer
  expenditures?
• a) Durable goods, non-durable goods, and services
• b) Durable goods, exports, and imports
• c) Services, net exports, and investments
• d) Housing market, service, and automobiles

Correct Answer A
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• 4) Between 2004 and 2006 personal consumer
  expenditures averaged what percent of Gross
  Domestic Product.
• a) 100
• b) 30
• c) 50
• d) 70

Correct Answer D