<p>If an agent is credit-constrained, it implies they would prefer to consume more (absent the borrowing constraint) in the current period than they are able to.</p>
<p>Consequently, any relaxation of this constraint on their borrowing will result in them consuming more. An increase in current income represents an easing of this credit constraint, since they have a higher present income, meaning they can consume more whilst borrowing the same amount.</p>

CC BY-SA 4.0
2024-07-14T07:25:33.170Z
2024-07-14T07:25:33.170Z
matthewoulton
<p>Title.</p>
<p>Higher income can come from better job, or moving from part-time to full-time employment.</p>

<wages><consumption><credit>
Why does higher income lead to higher consumption spending in credit-constrained households?
BeginnerCode776
# Why does higher income lead to higher consumption spending in credit-constrained households?

(Asked by: username_0 on 2024-07-09)

Title.

Higher income can come from better job, or moving from part-time to full-time employment.

**Tags:** wages, consumption, credit

---

## 1 answers

### Answer by username_1 on 2024-07-14. Score: 1

If an agent is credit-constrained, it implies they would prefer to consume more (absent the borrowing constraint) in the current period than they are able to.

Consequently, any relaxation of this constraint on their borrowing will result in them consuming more. An increase in current income represents an easing of this credit constraint, since they have a higher present income, meaning they can consume more whilst borrowing the same amount.


---

