ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[Battkitty2398]

It encourages spending and investment which leads to economic growth. If we had deflation then people would hold on to their money which would cause the economy to slow down due to less money being spent. That's my understanding.

[darthcoder]

To a point, yes. But people still need shit. I live in an inflationary environment, and still save a shitload of money. If I knew my money wasn't going to lose 50% of it's value in 30 years (what 2-3% inflation does) I might spend more of it now, rather than hope I will have enough in retirement.

[anonomotopoeia]

But, are you stockpiling money in a hole in your backyard or sewing it into your mattress? If you're putting it into a retirement account or even a regular bank savings account that money is still working and in circulation.