Explain the impact of future expectations on the current economy.

Future expectations on the current economy are a very important factor that influences economic performance. In fact, expectations have become part of mainstream economics, and the Chicago School of Economics in particular, is famous for its contributions to the field.

Explanation:

For example, if people think that the economy in the future will be bad, they will tend to spend less money, invest less, or only invest in very safe securities like U.S. Treasury bonds, and hoard some of their cash, for future spending. Another behaviour that could be displayed is using cash to buy large quantities of goods, in order to hoard them for the future.

These kind of actions would depress economic activity, or slow down recovery, because they would not only result in less consumption, but also less investment, and investment is one of the most important factors (if not the most, according to many economists) when determining future economic growth.

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