What's more useful for the economy of the country: when people are shopping like crazy or invest money?

Question

i'm totally dumb on such topic so i expect explanations,not the shouting "stupid question".
thanks in advance

Answer 1

It actually takes a little of both. When people are buying that increases demand for products and services. More people are making more money. In order to meet this demand business must invest in capacity, weather it be a new factory or a new resteraunt. To do so they will generally borrow money. For the banks to have the money to loan they need people and business to deposit money, in other words invest! To persuade us to make deposits they offer higher interest. If this seems circular it is. If people are making more money they have more to save but will only do so when the return seems better than getting that new dress or set of golf clubs.
The real trick in all of this is to find a balance. If we spend and business can't keep up because interest rates are too high prices rise and we stop spending. Stop spending and there is less borrowing so interest rates go back down. When this happens we start buying houses and cars because it seems like a better time to borrow and we start the cycle all over again. This is why the Federal Reserve raises and lowers interest rates, to try and keep things in balance. Hope this wasn't too long for you.

Answer 2

I believe it goes both ways:
People buy lots of products
Producer gets the money and creates new jobs to meet the higher demand and invests in larger facilities which in turn creates even more jobs.
More people have jobs and therefore money to spend to buy more products.................
That's the way economy works.
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