Consumer spending is increased.
What happens when consumer spending increases or decreases?
- Increases- Even a small downturn in consumer spending damages the economy. As it drops off, economic growth slows. Prices drop, creating deflation. If slow consumer spending continues, the economy contracts.
- Decreases- The increase in consumer spending in turn helps the economy sustain its expansion. If for some reason consumer confidence declines, consumers become less certain about their financial prospects, and they begin to spend less money; this in turn affects businesses as they begin to experience a decrease in sales.
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