Brazil Consumption - 1092 Words

Brazil – Consumption Analysis General Analysis The consumption and GDP data being considered for Brazil relates to the period 1996-2005. [1]The Consumption and National Income in Brazil during this period have risen in the same proportion approximately. The National Income and Consumption have been on a constant rise in the decade being analysed. The National Income of Brazil has grown at a Compounded Annual Growth Rate (CAGR) of 3.08%, while the Consumption of Brazil has grown at a CAGR of 2.98%. [pic] Consumption Function On the basis of regression carried out between National Income and Consumption of Brazil, the consumption function can be written as Consumption = Constant + MPC * National Income Consumption†¦show more content†¦A clear example of how both these parts of consumption work in tandem to bring about business cycle instability is the US economy when Alan Greenspan, Former Chairman, US Federal Reserve, was reducing interest rates. The constant consumption was affected by the reduction in interest rates and therefore people took more and more loan and the contractual expenditure in form of EMI payment and other forms of payment increased. Now expenditure for one is income for another. Therefore, as a result of reduced interest rates, business prospered as the US economy converted from savings economy into a consumption economy. Because the business prospered, the disposable income of individuals increased and therefore people consumed more, because the expenditure dependant on income increases with income. Now, with increased income, the APC falls and savings of people increases. Therefore, people started investing the saved money in real estate and th e demand for real estate increased leading to a bubble. Once, the bubble was created and Alan Greenspan retired, paving way for Ben Bernanke, Chairman, US Federal Reserve, started increasing interest rates, the disposable income reduced, leading to a reduction in the , but the fixed expenditure could not reduce, thus leading to expenditure commitments. Therefore, both the parts of consumption play an important part in business cycle instability. Appendix Data Sheet |Country or AreaShow MoreRelatedBusiness Case Study : Nova, The Producer Of Nova1508 Words   |  7 Pagesprospective target markets in South America – Brazil and Chile. According to the Central Intelligence Agency’s â€Å"World Factbook,† Brazil is a large country in South America, with a land area slightly smaller than the United States, making it the sixth largest country in the world. The population of Brazil is concentrated along the Atlantic Coast, with much of the population residing in the major cities of Sao Paolo, Brasilia and Rio de Janeiro. 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