Question

Is consumer spending the foremost important factor for economic recovery? Use the current economy to support your answer.

Answer 1

Yes, consumer spending is foremost important factor for economic recovery.

Because, aggreagate demand is defined as the total demand of goods and services within an economy.

Now, AD = C + I + G + NX

Where, C = consumption

    I = investment , G is Government spending

And NX is net exports.

Now increase in consumer spending will increase the aggreagate demand and this will lead to more output in the economy and real GDP will rise.

So, consumer spending is foremost important.

Now, at the current times, due to global pandemic named COVID-19, the aggregate demand of the economies have fallen down. And due to which the real out and GDP of the nations have declined.

And at this times , to increase the aggreagate demand in the economy is the major issue for Governments.

And aggregate demand can be also increased by increasing consumer spending.