It Will Be Good for the Economy!
Marge Simpson is shopping with her daughter, Lisa Simpson. Both go through clothes racks when Lisa hands her mother a gorgeous Chanel pink, monochromatic skirt suit with black detailing. Immediately, Marge is in love with it, but the price tag… not so much. The suit was initially $2,800 but now costs $90. Despite the marked-down price, Marge is still trying to decide whether or not she should buy. She hopes trying on the Chanel suit will make her decision easier, especially because the nearly 97% discount is hard to pass.
Marge comes out of the dressing room brimming with confidence. The suit fits her well, and she cannot take her eyes off herself in the mirror. Yet, Marge still questions buying the suit. Lisa can see that her mother is still unsure, and she begins to scold her mother for being too selfless and never treating herself. The mother dismisses these remarks. Then, in Lisa’s last attempt to persuade her mother, she claims, “Just buy it! You do not have to rationalize everything!”
To her surprise, Marge states, “Alright, I will buy it. It will be good for the economy!”
In case the last name did not make it obvious, Marge and Lisa are fictional characters from the sitcom, The Simpsons. Audiences of all ages have enjoyed this show. So, if Marge’s statement went over your head, let’s break it down.
When people spend money on goods and services, the total amount generated through this action makes up what is known as consumer spending. Consumer spending is a huge part of the United States Gross Domestic Product (GDP), the standard measure of all economic activity. It helps to think of GDP as a “report card” that measures a nation’s economic performance. For the country to ensure financial health, our economy must meet and grow GDP.
Since consumer spending makes up the lion’s share of the GDP, if personal consumption declines, this would negatively affect our economy. Therefore, consumer spending is an economic indicator, as it can give us insight and help us predict where the economy is headed.
At the start of the COVID-19 lockdown in 2020, the U.S. Bureau of Economic Analysis reported decreased consumer spending as people were laid off from work, stayed home, and had high levels of uncertainty. However, consumer spending increased once again as people spent lots of time online shopping while stuck at home. People purchased things they did not need, and items they hoped would entertain them.
Currently, consumer spending is the highest it has ever been. People are spending their money on various goods and services, which has been great for the economy’s health, as long as people in the United States do not take on levels of debt they cannot sustain. In addition, consumer spending demonstrates people don’t feel deep concern for the state of our economy because if they did, personal consumption would be declining.
All this is to say that the more we spend, the better it is for the economy. Therefore, if there is something that you have been eyeing but do not want to spend money on, remember Marge’s words: It will be good for the economy!
