Consumption and debt key questions do we need more

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Consumption and Debt Key Questions: Do we need more money because the price of necessities keeps rising out of reach? Or, are we just a bunch of greedy materialists who use money we don’t have to buy what we don’t need to impress people we don’t even like? How do credit card and other types of debt affect our ability to achieve the American Dream? Is credit simply a tool that allows us to “smooth consumption” over time or is it a vile trap that, once caught in it, we are never able to get out? Resources: American Values: Opposing Viewpoints (Americans Consume Too Much; Americans are Becoming Thrifty; Capitalism is Good for America; Capitalism is Bad for America); discussion regarding materialism in Running Out of Time video. 1. Argue for and against the idea that capitalism drives America's success. a. Capitalism Drives America’s Success: i. Creates more efficiency ii. Promotes economic growth iii. People forced to work hard b. Capitalism Doesn’t Drive America’s Success: i. Motive is to sell goods and services for a profit, not to satisfy people’s needs ii. Creates monopolies iii. People are rich just from inheriting wealth iv. Creates wealth inequality v. Does not create equal opportunity 2. Argue for and against the idea that Americans are thrifty. a. Americans are Thrifty: i. Wealthy are saving and investing instead of spending and splurging b. Americans aren’t Thrifty: i. Nonwealthy spend a lot more of their income than they save ii. Easier for people to spend using credit 3. Use the economic concepts of conspicuous consumption, lifecycle need, lifestyle wants, and the relative income hypothesis to analyze a specific situation.
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a. Conspicuous Consumption- the purchase of goods and services with the intent of displaying your wealth 4. Evaluate the impact of America’s consumption patterns on our well-being (broadly defined) and the well-being (broadly defined) of other nations. a. 5. Identify the factors fueling growth in consumer debt. a. Increased use of credit b. Decreased income, but same expenses c. Increased medical expenses d. Divorce 6. Describe the level and trend of credit use by the average American, debt levels of the average American, and loan default and bankruptcy rates a. Average US Credit Card Debt- $15,000 b. Average Mortgage Debt- $150,000 c. Average Student Loan Debt- $30,000 7. What has been the relationship between income and debt levels over time? a. People with lower income are more likely to be in debt 8. Explain how the terms conspicuous consumption, lifecycle hypothesis, diminishing marginal utility, relative income hypothesis, and time preferences can explain patterns of spending and saving in the U.S. a. Life-Cycle Hypothesis- theory that predicts consumer spending is based on a percentage of the individuals anticipated life income i. Tendency to consume is greater in younger adults and older adults instead of middle aged, who earn the highest income b. Diminishing Marginal Utility- states that as a person increases consumption of one product- while keeping consumption of other products constant- they receive less of a benefit from consuming each additional product i. Entices you with “all you can eat” knowing that each additional plate provides you with less satisfaction ii.
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