Question
Read the article entitled Despite high inflation, Americans are spending like crazy - and it's kind of puzzling, by Scott Horsley, npr.com, February 25, 2023.
Read the article entitled "Despite high inflation, Americans are spending like crazy - and it's kind of puzzling," by Scott Horsley, npr.com, February 25, 2023. You can find the article at
https://www.npr.org/2023/02/25/1159284378/economy-inflation-recession-consumer-spending-interest-rates
Using the article as a starting point, apply at least three models of consumption behavior* in answering the questions below.
* The models to consider are (1) the Keynesian consumption model, (2) Friedman's permanent income model, (3) Modigliani's life-cycle model, and (4) Fisher's model applied to real interest rate changes.
A) What are some reasons why consumption spending might continue to be strong and contribute to economic growth over the rest of 2023? (one to two paragraphs)
B) What are some reasons why consumption spending might drop to a lower level and slow down economic growth over the rest of 2023? (one to two paragraphs)
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