Prepare to discuss the topic of consumer spending using real-world examples.
Consumer spending, once the driving force of the U.S. economy, is likely to remain stagnant for years as households struggle to cut debt and build up savings, economists say. Why does cutting debt and building up savings affect consumer spending? If consumer spending remains stagnant, what will be the likely effect on the economy? Cutting debt and building up savings require a decrease in consumer spending. If consumer spending remains stagnant, the economy will most likely grow slowly in the short run. Suppose that a consumer in Germany buys a Ford Mustang for a price of $30,000. Do U.S. exports increase by $30,000?