<p>In the long run, consumers cannot spend more than they earn. In the short run they can spend more, increasing consumer debt, or they can spend less, decreasing consumer debt.</p>

<p>There is a limit to how much consumers are allowed to borrow. The limit is determined by consumer income and the interest rate.</p>

<p>If consumer debt increases faster than consumer income then eventually consumer debt will peak; bank and credit companies will stop lending more money causing a halt to the spending spree.</p>

<p>Note that consumer credit tends to increase market fluctuations. When times are good more people have jobs and consumers with jobs are allowed increased credit. When times are bad you see the opposite. </p>

CC BY-SA 4.0
2018-05-02T12:38:15.603Z
2018-05-02T12:38:15.603Z
Klas Lindbäck
<p>Consumer debt is the obligation to pay for the credit that the customers have used. But, how can tapping out more credits make business more vulnerable?</p>

CC BY-SA 3.0
2018-05-01T21:58:37.307Z
Vulnerable to the business? Could you please clarify the meaning?for example, what businesses are you referring to?
Brian Romanchuk
<debt><credit>
What is consumer debt and how could it make businesses vulnerable?
Sujan Stc
# What is consumer debt and how could it make businesses vulnerable?

(Asked by: username_0 on 2018-05-01)

Consumer debt is the obligation to pay for the credit that the customers have used. But, how can tapping out more credits make business more vulnerable?

**Tags:** debt, credit

> **Comments:**
> **username_1**: Vulnerable to the business? Could you please clarify the meaning?for example, what businesses are you referring to?  

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## 1 answers

### Answer by username_2 on 2018-05-02. Score: 2

In the long run, consumers cannot spend more than they earn. In the short run they can spend more, increasing consumer debt, or they can spend less, decreasing consumer debt.

There is a limit to how much consumers are allowed to borrow. The limit is determined by consumer income and the interest rate.

If consumer debt increases faster than consumer income then eventually consumer debt will peak; bank and credit companies will stop lending more money causing a halt to the spending spree.

Note that consumer credit tends to increase market fluctuations. When times are good more people have jobs and consumers with jobs are allowed increased credit. When times are bad you see the opposite.


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