service flows

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The services rendered by consumer durables. These count as consumption when they are bought, but items such as furniture, refrigerators, cars, or boats give services over years and often decades. Only in the case of housing do national income accounts follow the procedure of treating their purchase as investment when it occurs and the flow of services as imputed income in later years. This means that when individual or national consumption expenditure falls during depressions or in wartime, the figures exaggerate the immediate fall in utility, which builds up gradually as stocks of consumer durables wear out. Similarly, the real standard of living does not rise as fast as consumption spending during a recovery.

Subjects: Economics.

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