The falling oil prices have increased the purchasing power of the American people because the oil is one of the most eminent product for the American families, and thanks to the decreasing oil prices, they will spend less on the oil, and they will have opportunity to save relatively more, or they can consume relatively more from the other products and services.
What are the macroeconomic effects of falling oil prices?
The decreasing oil prices will decrease the production costs in the US, and also, it is expected to influence the domestic demand positively. Considering that the increasing domestic demand might play an essential role in stimulating the economy after the global financial crisis in 2008, we might expect that the falling oil prices might increase the domestic demand, stimulate the economy, and increase the economic growth rate.
What factors put a dampener on economic growth?
If the consumption increases, and it creates new business and production opportunities for the producers, and the country can also export its products to the other countries, and then we might expect a high rate of economic growth in the national economy. The exchange rates, the inflation, the attitudes of the consumers and the producers in the economy, the interest rates, and many other factors might influence the economic growth.
Why are Americans saving more than before the financial crisis?
Because Americans still feel not safe after the global financial crisis. Also, they have learned that using more money compared to their financial resources might cause very high risk of losing everything for them. Because of that, they save more compared to the time before the crisis. Also, the low-interest rates and the good macroeconomic conditions decrease the burden of debts on Americans.
What is the University of Michigan consumer confidence index? Why is it useful?
The University of Michigan consumer-confidence index exhibits the attitudes of the consumers for the American economy. The index is a measuring tendency among the consumers. The results indicate that the American people are keeping their same positions in the markets. Considering that the turmoil in the financial markets, the consumers are optimistic as retaining their same positions. The index is useful for monitoring the consumer behaviors because consumer behaviors are an important determinant of the economic growth.
