Role Of Consumer Confidence 1 1

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Part 2: Discussion on The Role of Consumer’s Confidence to an Economy
Definition of Consumer Confident and Role of Consumer Confidence to Economy
Consumers’ confident is important to the economy because consumers are the party whose make decision to purchase goods and services in the market. Consumer confident is an economic indicator which measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. Consumer confidence determines their willingness to spend, borrow and save during a specific period. A high level of consumer confidence will encourage a higher MPC (Marginal Propensity to Consumer). This means that consumers will spend most of their income to consume goods and services rather than save in the bank (MPC greater than MPS). For example, if a consumer has a APC of 0.75, he or she will spend 75% of their income to consume and the remaining 25% of income to save.
In a simple word, when a country has high consumer confident, it means that the consumer in the country is more willing to spend and this will cause MPC to increase. When MPC increase, consumption of the country will be increased and leading to increase in GDP. Thus, consumer confident is important for a country to generate higher GDP.
Consumer confident plays an important role to economic of a country. It decides the demand of the goods and services and indirectly controls the supply of goods and services. Consumer confident also affects consumption of a country and cause the increment of GDP,
Consumers’ confidence is measured by the Consumer Confidence Index (CCI). Consumer Confidence Index (CCI) defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. The CCI is prepared by the Conference Board and was first calculated in 1985. In that year, the result of the index was arbitrarily set to 100, representing the index's benchmark. This value is

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