Sometimes, it is hard to understand, when people keep on saying about growing the economy by spending. On the other hand, we hear advises on saving more.
So, which one is good for the economy? Spend or save?
Prosperity in economy will be achieved as long as there is a growing demand and supply of things or services. However, overspending will definitely create financial problem in the future. Not spending at all will also cause a major problem.
Simply put, as long as there is people demanding for nasi lemak there will be sellers around, for example Mak Kiah. When more people is buying nasi lemak – or anyone buys more nasi lemak -, Mak Kiah will have to increase her supply. When the demand is too high, she might not be able to do it alone. Hence, she hires workers. This may also encouraged more nasi lemak businesses to appear. There, Mak Kiah nasi lemak’s economy is growing.
The effect of this growth is not felt by Mak Kiah alone. Those workers she hired, will also gain. They will have their own money and spend it in other economical sector for example, in Pak Hamid’s air tebu.
You can imagine, the similar effect to Pak Hamid, Pak Hamid’s workers and the list goes on. The economy generally goes positively, on an upward spiral.
On the other hand, if people stop buying nasi lemak, demand reduces. Mak Kiah will reduce the production of her nasi lemak. With this reduction, she may no longer need workers. Hence, layoffs happened. There, nasi lemak’s economy is in recession.
Similar to growth, the effect is not felt by Mak Kiah alone. It will be contagious. Workers will be unemployed. They in turn, cannot spend. Pak Hamid will also has less customers. It goes in a downward spiral.
A nation’s economy works almost the same, no matter how over-simplified the example above is.
Nurul Azmir bin Nadzar
Naib YDP ISMA Kemaman