Weekly journal Essay Example | Topics and Well Written Essays - 250 words - 4

Weekly journal - Essay Example When individuals are unemployed they have less money to spend on goods and services and they are more inclined towards ensuring that their basic needs are met. Due to this they spend more on the basic necessities such as food and clothing and ignore spending money on luxurious products and services such as cars. Another subject that the chapter focuses on is the fiscal and monetary policies that government may use to encourage individuals to spend more. When the government implements an expansionary policy, it allows business to borrow more and due to these businesses invest more (Krugman 148). More investment leads to increase in demand for employees which in turn increases the wages paid to employees. Due to this increase, individuals tend to spend more and they even spend on luxurious items. But if the demand for goods and services continuously increases, suppliers will increase their prices on continuous basis and this would lead to increase in inflation rate and decrease in the number of goods and services that can be purchases by individuals in a particular economy (Krugman