Marginal Propensity to Save

And finance Allah shmoop What is personal consumption expenditure Well

consumer spending makes up a big part of the U

S economy an estimated two thirds of it to be

exact Tracking consumer spending is a key to tracking the

overall economy Will the personal consumption expenditure is the formal

way to measure consumer spending Right So first what is

it consumer spending Example you work at Smooshy Love No

not that kind of company It's a company that makes

heart shaped pillows people by the pillows for you know

birthdays and Valentine's Day as a reward for getting their

annual cardiovascular checkups You know stuff like that All the

money spent on the pillows pays your salary Customers pace

mushy love for the pillows Smoochy Love gives some of

that money to you in the form of a paycheck

Then your paycheck allows you to buy a host of

other consumer goods You buy food and gas and clothes

and electronic toothbrushes and Christmas tree shaped pillows for holiday

gifts and or Arbor Day decorations You know stuff like

that Some of the money you spend on this stuff

eventually goes toe workers at the companies who make those

products These workers then spend that cash on other stuff

and so on It's the economic circle of life all

right well that consumer spending cycle is what represents two

thirds of the economy something like nine trillion dollars a

year So the spending on consumer goods is crucial Economists

and policymakers need a way to track all that spending

It allows them to see how things are going and

to make predictions about overall economic growth Enter the P

C E or personal consumption expenditure Tracker Here It's the

fancy name for all that money you spend on knickknacks

and doodads and services to like you know consumer spending

includes stuff like oil changes You get for your car

and doctor visits where you turn your head and cough

and you know a back hair Electrolysis Personal consumption expenditure

is the official stat for measuring consumer spending Any economy

in the US The figure is compiled monthly by the

Department of Commerce Will the same report also includes details

on personal income and disposable personal income Two measures of

you know how much money people make right So the

government looks at how much smooshy love is paying you

and how much of that money your spending while the

PC also helps to track changes in price's Along with

the income and spending data the government issues what's called

the P C E price index It shows how much

prices for consumer goods have changed during that period Well

the index measures retail inflation basically or deflation of prices

go down smooshy love overproduced heart pillows ahead of Valentine's

Day Now it's March and they've got a warehouse full

of them Then they drop prices Just a blowout inventory

Well that drop in prices would show up in the

PC price index It's mushy Love is now facing lower

revenue for this month Own theory Maybe they cut your

salary which then shows up in the government report in

the personal income section Now you have less money to

buy other goods and you spend less on clothes and

back hair electrolysis and well that lower spending shows up

in the PC east at the Now We gotta go

find someone else to tweeze are back hair with a 00:03:12.688 --> [endTime] discount Get out