In: Economics
how consumer spending impacts economic growth
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