2016 - 19th Annual Steven Galovich Memorial Student Symposium

Presentation Title

A New Theory of Consumption: How Debt has Changed Spending Habits

Student Presenter(s) and Advisor

Jenny Hennum, Lake Forest College

Location

Library First Floor

Abstract

In light of evolving conditions and consumer behavior, traditional economic models have failed to account for the impact of debt on consumer spending behavior, leading to the formation of inaccurate predictions regarding economic policy. Therefore, in response, this presentation will discuss a model, which incorporates the impact of debt (increasing and repayment) on the spending behavior of individuals over their lives. At its center, the new model proposes a new consumption equation, through the introduction of the concept of available income, to account for the increase in debt during the earlier years and the repayment in the later years of one’s life. From this model, it can then be argued that borrowing generally leads to a negative net change in real GDP, and thus has negative implications for the economy as a whole. This will further help to foster insights regarding the recent ineffectiveness of fiscal policy.

Presentation Type

Individual Presentation

Start Date

4-5-2016 9:00 AM

End Date

4-5-2016 10:15 AM

Panel

Decision Making in Financial Markets and Consumption

Panel Moderator

Carolyn Tuttle

Field of Study for Presentation

Economics, Finance

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Apr 5th, 9:00 AM Apr 5th, 10:15 AM

A New Theory of Consumption: How Debt has Changed Spending Habits

Library First Floor

In light of evolving conditions and consumer behavior, traditional economic models have failed to account for the impact of debt on consumer spending behavior, leading to the formation of inaccurate predictions regarding economic policy. Therefore, in response, this presentation will discuss a model, which incorporates the impact of debt (increasing and repayment) on the spending behavior of individuals over their lives. At its center, the new model proposes a new consumption equation, through the introduction of the concept of available income, to account for the increase in debt during the earlier years and the repayment in the later years of one’s life. From this model, it can then be argued that borrowing generally leads to a negative net change in real GDP, and thus has negative implications for the economy as a whole. This will further help to foster insights regarding the recent ineffectiveness of fiscal policy.