Answer to Question #79957 in Macroeconomics for Joseph

Question

. During 2002, real GDP in Japan rose about 1.3 percent. During the same period, retail sales in Japan fell 1.8 percent in real terms. What are some possible explanations for retail sales to consumers falling when GDP rises?

Answer 1

In 2002, the Japanese economy began to recover after a nearly 10-year crisis. Household expenses continued to be characterized by an increased propensity to save, which led to a decrease in retail sales. In addition, the Central Bank of Japan pursued a policy of deflation, which forced the population to postpone purchases in anticipation of an even lower price of goods. This is what became the decisive factor in reducing the level of retail sales.