Household Consumption and Saving

            Various factors affect the consumption and saving habits of citizens. It is the role of government to ensure that the citizens’ consumption and its investments do not disrupt the economy. However, the achievement of such a task due to the dynamic nature of the economy. Thus, economists cannot model the performance of the entire economy. Phillip Hammond is in such a dilemma since he has to solve the current challenges in the economy and also strategize for the future. The primary problem is that the future is unknown and he has to ensure the British economy remains stable.

Economic Evaluation

            It is evident that the present challenges lower the consumption behavior of the citizens. However, it is advisable to focus on the future since it is bleaker than the present. The government spending has been increasing over the years. In the year 2010, it was 10 % of the GDP. The value was the most significant since the year 1945 (The Economist, 2018). There is various cost-saving initiatives employed from 2010 to 2018 which has ensured the government expenditure is 2 %. The expenditure is leakage to the national income (Williamson, 2018). Therefore, its decrease implies a 2% increase in nominal GDP. Consequently, if the trend continues, the government will be able to lower public debt by 85 %. Figure 1 in the appendix shows that the pattern has the government can reduce the expenditure even further. However, the chancellor has to ensure that the challenges of the 1930s depression do not significantly affect the economy if they occur.

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