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Many factors influence the economy, including consumer spending, global trade, business investment and government policy.
As these factors change, so too does the economy.
Heres how much impact you have on the U.S. economy as a consumer.
Lets break this down further, starting with purchasing decisions.
The opposite is also true.
Of course, not everything will change in price based on demand.
Nor will demand always drop because of current prices.
Things like prescription medications tend to remain in high demand even if prices are also high.
These types of goods are considered inelastic.
Its also worth noting that consumer demand can affect not just pricing but also inflation.
The current annual inflation rate in the U.S. for the 12 months ending in July 2024 is 2.9%.
The greater the demand forservices and goods, the more prices tend to rise thus higher inflation rates.
But again, when demand drops, prices often do too aside from inelastic products.
This can also influence inflation rates.
Next up is investment choice, which is also tied to consumer confidence.
This can generate more capital for businesses, which in turn allows them to continue to grow and thrive.
On the other hand,less consumer confidence and therefore fewer investments can result in an overall economic decline.
And then theres employment and wages/income.
These can have a direct effect on the economy, as well as an indirect effect.
When unemployment rates are low and wages are relatively high, more people are willing to spend money.
This is especially true when they anticipate that theyll continue to receive steady income for the foreseeable future.
As indicated in aU.S.
More U.S. jobs directly or indirectly relate to consumer spending than to all other sectors of the economy combined.
Take theclean vehicle tax creditfor EVs as an example.
Those who qualify can receive up to $7,500 toward their electric vehicle as a tax credit.
This incentivizes more people to purchase energy-efficient vehicles.
During times when consumer confidence is high, the economys overall health can benefit indirectly and directly.
When demand drops, pricing sometimes falls as well, but economic growth can also slow.
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