What is defined as spending by households on consumer goods and services?

The definition of spending by households on consumer goods and services is encapsulated in the concept of consumption. In economics, consumption refers specifically to the total value of all goods and services bought by households. This includes everyday items like food, clothing, and household products, as well as services such as healthcare, education, and entertainment.

Consumption is a critical component of the broader economic framework because it directly influences overall demand within an economy. When households increase their consumption, it typically leads to higher production levels, and consequently, economic growth can occur as businesses respond to the demand for goods and services.

Investment, on the other hand, refers to spending on capital goods that will be used for future production, which does not directly fit the definition of household spending on consumer goods. Government expenditure pertains to spending by the government sector, while savings relate to the portion of income that is not spent. Thus, consumption is the most accurate term for household expenditure on goods and services.