on the other hand could the output of the economy for the future generation set forth in high level if the consumer consumed their disposable income after the taxes deducted on their income received from firm?
To determine the potential output of the economy for future generations, it is important to consider several factors. One key factor is the level of consumer consumption, specifically the portion of disposable income that consumers spend. However, it is also crucial to consider the overall economic conditions, investment levels, technological advancements, government policies, and global factors that can influence economic output.
To estimate the potential output of the economy based on consumer consumption, one approach is to consider the concept of aggregate demand. Aggregate demand represents the total spending in an economy by households, businesses, and the government. Consumer consumption is a significant component of aggregate demand.
To calculate aggregate demand, you would need to sum up various components including consumer spending, investment, government expenditures, and net exports. Consumer spending is typically driven by disposable income, which is the amount of income left after taxes are deducted from individuals' income received from firms.
Here's a general formula for aggregate demand:
Aggregate Demand = Consumption + Investment + Government Expenditures + Net Exports
To estimate the impact of consumer consumption on future economic output, you would need to consider the effect of changes in consumer behavior, such as an increase in disposable income spent on consumption. Higher consumer consumption can stimulate economic growth in the short term, as increased spending often leads to increased production and job creation.
However, to sustain long-term economic growth and ensure a positive impact on future generations, it is also important to consider factors like savings and investment. Higher levels of savings and investment can lead to increased capital formation, productivity growth, and technological advancements, which are crucial for long-term economic development.
In summary, while the level of consumer consumption, specifically the amount of disposable income spent, can have some impact on the future output of the economy, it is essential to consider other factors, such as savings, investment, government policies, and external factors, that collectively influence long-term economic growth.