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Proper Consumption

The saving passes to be seen as resulted of the desire of the individual to provide its proper consumption during the oldness, when its income of the work falls the zero. (Dornbusch and Fischer, p.159). In accordance with the theory of the cycle of the life, the desire of the people in wanting to keep the standard of consumption throughout the life makes in that the people open hand of the immediate consumption and save in the gift foreseeing a fall of income in the future that will be compensated by what it was saved. Thus the people accumulate wealth until its retirements and the trend is that this accumulation diminishes when this date in fact arrives. At the beginning of this cycle the people are entering for the work market and its initial income normally is minor who in the long stated period, and in believing that they will go to have an increase in the income level these people will be able to use the credit available what it inhibits in this stage the increase of the saving level. Already at as a moment, in the second part of the cycle, the increase of the waited income will concur so that the before done loans are paid and from I accumulate it to the payment of capital for the retirement in fact occurs. In one another hypothesis the young passes for a case of restriction for liquidity in which they do not obtain loans, of this form its available income will be all directed toward the consumption, in the second phase the people had thus only obtained to start to accumulate wealth given the credit lack to these. To broaden your perception, visit Edward Scott Mead. According to Friedman (1977), the private guarantees of an assistance the oldness changed throughout the years its scene. Old, the children guaranteed the financial assistance to the parents. In the current days, the people more are worried in guaranteeing its proper financial tranquilidade in the future.