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3.2 Households
3.2 Households
Chapter 3.2
◦ In the breakout rooms assigned, research to support the view that saving are
impacted by cultural and societal differences.
Borrowing
◦ Borrowing enables people to spend more than their current disposable
income.
◦ involves a cost in the form of interest which has to be paid. It is also
usually a temporary situation as loans and overdrafts have to be repaid.
◦ Personal debt – total stock of borrowing by a person or a household.
◦ People borrow money for a range of requirements. Research and
suggest what are some of the most common reasons for borrowing.
◦ People unable to repay loans will be declared insolvent by the court with
their belongings seized and personal assets sold to repay the debts.
Borrowing
◦ Borrowing has risen in various countries over the years, raising concerns
that borrowing has become cheap and easy.
◦ Increasing borrowing means increased expenditure on paying off loans and
interest and less expenditure on goods and services, leading to reduced
output and increased unemployment.
◦ It could eventually lead to recession or decline in economic growth.
Influences on borrowing
◦ The availability of loans and overdrafts. The easier it is to borrow, the more likely
people are to borrow.
◦ The rate of interest. A rise in the rate of interest will increase the cost of borrowing,
which is likely to reduce borrowing.
◦ Confidence. The more confident people are about the future, the more they will
anticipate earning in the future. They may adjust their spending patterns now,
financing some of their extra expenses by borrowing with an expectation that their
higher income will enable them to repay their loans.
◦ Social attitudes. Some countries and some groups within countries are more
concerned about the risks of people getting into debt by borrowing, than others.
◦ Wealth – people with wealth can find borrowing easier. They have collateral to offer
as a security against a loan.