Question

In: Economics

how consumer spending impacts economic growth

how consumer spending impacts economic growth

Solutions

Expert Solution

Consumer spending is what families buy in order to meet daily needs. This private ownership includes all goods and services. They are each a customer. The products we buy every day build demand which keeps companies competitive and employs new workers

Consumer spending is the US economy's single most powerful guiding force.Keynesian economic theory suggests policy should encourage demand to stop a recession. On the other hand, analysts on the supply side say the government would slash company taxes to build jobs. But no matter how low taxes are, businesses can not raise productivity without demand.
If you deny that, imagine what if everybody quit investing. In the process, companies will go bankrupt and lay off employees. Then, nobody will have to pay the state.

Yet too much of a positive thing can be dangerous too. When market demand exceeds the capacity of the suppliers to supply the products and services, prices rise. Unless that happens it will trigger inflation. If customers expect rates to climb ever higher, they should pay more now. That further raises competition, putting higher prices on companies. It is a prophecy that is hard to avoid, self-fulfilling. This is why the nation's central bank, the Federal Reserve, has the main responsibility to avoid inflation


Related Solutions

how does gobalization impacts the environment? how inpacts environmental protection and economic growth?
how does gobalization impacts the environment? how inpacts environmental protection and economic growth?
Give example of a factor-price distortion in LDCs? Explain how it impacts their economic growth.
Give example of a factor-price distortion in LDCs? Explain how it impacts their economic growth.
Ecological Economics & Growth. Is the current economic growth model sustainable? What are the impacts of...
Ecological Economics & Growth. Is the current economic growth model sustainable? What are the impacts of the economic growth model on the triple bottom line of environment, economics, and equity? In what ways might a transition to an ecological economics paradigm affect the triple bottom line? Describe how a steady state economy or "Prosperity without Growth" might be possible.
What are the positive sides of Micro Finance impacts on economic growth
What are the positive sides of Micro Finance impacts on economic growth
What are the negative sides of Micro Finance impacts on economic growth ?
What are the negative sides of Micro Finance impacts on economic growth ?
Summarize how entrepreneurship impacts economic growth and society. Please keep in mind when considering the two...
Summarize how entrepreneurship impacts economic growth and society. Please keep in mind when considering the two additional readings that the Bureau of labor Statistics information only goes to 2010 while the Kauffman research includes mush more recent data. 2 word page. Report from the Bureau of Labor Statistics concerning the impact of entrepreneurship on economic growth, particularly in the area of job creation. Click http://www.bls.gov/bdm/entrepreneurship/entrepreneurship.htm link to open resource. http://www.kauffman.org/what-we-do/resources/entrepreneurship-policy-digest/the-importance-of-young-firms-for-economic-growth
Discuss the impacts of the Economic Growth Model on the Triple Bottom Line (TBL) of environment,...
Discuss the impacts of the Economic Growth Model on the Triple Bottom Line (TBL) of environment, economics, and equity- and discuss how a fashion (or related) company can transition to a new ecological-economics paradigm that will specifically affect the Triple Bottom Line.
According to Neoclassical economists the following is a means to stimulate economic growth? government spending to...
According to Neoclassical economists the following is a means to stimulate economic growth? government spending to increase demand high taxes low taxes The Phillips curve illustrates a trade-off between ________ and ________. the natural rate of unemployment rate; the actual unemployment rate the natural rate of unemployment; inflation unemployment; inflation The theory of ________ assumes that individuals will use all information available to them to form the most accurate possible expectations about the future. 答案选项组 rational expectations Keynesian economics adaptive...
How does GDP growth (or lack of its growth) impacts the lives of average citizens? In...
How does GDP growth (or lack of its growth) impacts the lives of average citizens? In other words, why is GDP growth in the economy important for the people who live in that economy? What happens during recessions and does it impact investment and consumption in the economy? Moreover, any idea why do recessions happen?
1.In country A, government increases spending on building infrastructure. However, the economic growth of the country...
1.In country A, government increases spending on building infrastructure. However, the economic growth of the country remains slow. Explain why. (Don’t just say that building physical capital is not sufficient for a country to grow.) 2. In country B, political unrests always occur, and these decrease economic growth. Explain why political unrests reduce firms’ investments and human capital of country B?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT