Consumption engine of economic machine
Consumption is one of the most important components of gross national product.
It comes on both sides of the equation where the income and expenditure when
measuring gross national product. From this standpoint, the consumption per
person (spending) is the income of another individual. The consumption depends
heavily on several factors, most notably income, in which case the income is
divided into consumption and savings.
In
cases where low-income individual or family consumes all income or all of this.
The increase in the proportion of income from this income begins to decline.
Statistical studies have shown that the proportion of total consumption of some
communities up to approximately 90% of the income and the rest goes to savings.
The proportion of savings and consumption from one community to community, some
communities tend to consume more and some high proportion of their saving.
We
can not overlook the importance of consumption to economic growth, with
increased consumption, especially of durable goods encourages the production,
which in turn encourage greater employment and create new business. The savings
in direct investment often lead to the promotion of investments, which are
long-term in nature, which is higher than in economic development and economic
growth.
During the economic boom have jobs, and increase the volume and type of consumer
spending, investment and grow accordingly, the true magnitude of the gross
national product. We can not lose sight of that in any economy there will be
periods of prosperity, followed by periods of stagnation, or so-called economic
cycles, in periods of recession, slowing the rate of growth of both consumer
spending and capital spending, which leads to a lack of new opportunities for
action, which lead to increase Unemployment, financial crises may occur leading
to the loss of banking, capital markets ability to successfully play its role,
and this may lead to lower profits and the faltering stock prices, in addition
to low levels of real gross national production levels can be achieved.
In
any case, alternate successive waves of economic recovery and decline
(recession) with whom it is important to determine the level that should grow to
national production so that the real level of full employment through the use of
fiscal and monetary policy appropriate in both cases.
It
is important to distinguish between savings and investment, factors affecting
each, and this is crucial and important for economic analysts, as some believed
that the most important role of investment lead to economic growth and that the
most vulnerable to volatility due to the change in investor expectations and the
multiplicity of factors that could Affecting these expectations. In addition to
the revenue impact on consumer spending are many other factors affect each of
them to some extent this expenditure, such as the amount of wealth owned by the
individual, his age and social outlook for prices and future income, customs and
traditions prevailing in the society (or what is known as taste) and The
economists give income-important than other factors.
Applied Studies have shown that the volume of consumer spending in direct
proportion to the size of the ideal income, with other factors unchanged. Must
also be alert to different individuals in their behavior and habits of
consumption and saving at different income levels. This is in addition to
differences among individuals in terms of commitment and follow certain customs
and traditions, such as tradition and social simulation.
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