n (Budworth, 2010:1); the objective of this research paper is to educate consumers on the effect of a credit crunch on them and also make them financially literate.
A credit crunch usually happens during a recession (as what we are in right now) that results in greater difficulty in getting or securing borrowed money from banks and lenders. A crunch occurs because the usual lenders are nervous about lending out their monies due to the reduced prospects of repayment, such as during a recession when the economy is not doing so well and impacts negatively on people’s ability to repay a loan.
This brief paper aims to look and discuss how the current credit crunch is affecting all consumers. Most academic research and newspaper reports only talked about a credit crunch and its impact on big corporations but neglected its effect on individuals. It is the objective of this paper to correct this oversight and enlighten people on how the credit crunch affects them individually on a personal level. The rationale for choosing this topic is that a credit crunch has a negative effect on everybody from availability of jobs to the ease of getting a loan and to the interest charged on credit cards and home mortgages; its impact is very wide ranging.
Consumer spending accounts for roughly 70% of the United States economy. GDP is the measure of all the goods and services produced by labour and property within the country (Young, 2011:1). The United States economy has a big impact on the world economy because of its sheer size. However, there are also some constraints to consumer spending, primarily a depressed economy that contributed to a high 9.8% unemployment rate. Even here at United Kingdom, the economy is also largely dependent on consumer spending. Figures produced from the statistics office showed that household final consumption expenditure (HHFCE) had grown by 1% only in the third quarter of last year (at current prices) compared to1.9% growth in the second quarter of