CC3152 Principles of Financial Planning Tutorial 1 1 Suggested Answers to Tutorial Questions (Lecture 1) Discussion Questions 1. The average propensity to consume is the percentage of each dollar of a person's income that is spent (rather than saved), on average, for current consumption. Yes, it is quite possible to find two persons with significantly different incomes with the same average propensity to consume. Many people will increase their level of consumption as their incomes rise, i.e., buy a nicer home or a newer car. Thus, even though they may have more money, they may still consume the same percentage (or more) of their incomes as before. 2. Individual time horizons can vary, but in general individuals would expect to achieve their short-term financial goals in a year or less, intermediate-term goals in the next 2-5 years, and long-term financial goals in more than 5 years. (Refer to Exhibit 1.6 on p. 11 of the text for examples of financial goals.)
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