What encompasses consumer spending?

Consumer spending refers to the total amount of money that households allocate to purchase goods and services over a specific period. This encompasses all expenditures on various categories, including necessities like food and clothing, discretionary items like entertainment and luxury goods, as well as services such as healthcare and education.

This concept is crucial in economics as it represents a significant portion of overall economic activity, often influencing the economic health of a country. It helps determine the demand for products and services in the market, thereby impacting businesses and their investment decisions.

The other options pertain to different aspects of economic activity. Investments made by businesses focus on future growth and development rather than direct consumer expenditure. Government spending relates specifically to public services and infrastructure, which is a separate category of economic activity. Lastly, savings deposits affect overall economic liquidity and future consumption but do not constitute spending. Therefore, consumer spending solely captures the actual outlay of money on goods and services, making it the correct choice.