Spending

Spending is the act of using money or resources to acquire goods, services, or to meet obligations. It can occur in cash, with card payments, or on credit, and decisions affect personal finances as well as broader economies.

In macroeconomics, spending is a primary component of aggregate demand. Household consumption typically accounts for a large share of GDP in many economies. Distinctions are made among consumption, investment, government spending, and net exports.

Spending can be categorized into several types: consumer spending on goods and services; government spending on public goods and services; business investment in capital equipment, software, and structures; and transfers such as pensions or unemployment benefits, which are not purchases but influence disposable income and future consumption.

Determinants of spending include income and wealth, expectations of future income, interest rates, credit access, prices, taxes, and demographics. Behavioral factors and budgeting practices also shape spending patterns.

Measurement in national accounts uses the expenditure approach, with C for consumption, I for investment, G for government spending, and NX for net exports. Data such as the personal consumption expenditures (PCE) index track household spending.

Policy and behavior: governments influence spending through fiscal policy and transfers, while central banks influence spending by adjusting interest rates and credit conditions. Individuals use budgeting and debt management to align spending with goals; excessive borrowing can lead to financial strain.

Globally, sustained spending without corresponding income or productivity can raise debt and inflation. Balanced approaches aim to support essential needs, investment, and long-term financial stability.