Question

What results when consumers become apprehensive about their job security and their financial security?

Answer 1

After consumption spending results when consumers become apprehensive about their job security and their financial security.

What happens to the price level as a result of an increase in spending ?

• As the average price level falls¸ consumers have more financial wealth and decide to increase spending.
• As spending increases, there will be upward pressure on the price of inputs including wages.
• As the marginal cost of production rises, businesses start to increase prices as they attempt to produce more.

What happens to the level of unemployment because of the increased spending?

• The higher spending causes businesses to raise prices. The economy returns to full employment at a higher price level.
• If the economy is left alone, the increased unemployment will eventually cause wages to fall and the economy will return to full employment at a lower price level.

What are the effects of unemployment essay?

• Effects of unemployment include over exploitation of available labor, reduced rate of economic growth, reduced human capacity, loss of human resources and increase in poverty levels .
• One positive effect of unemployment is the availability of adequate labor at reduced market prices.

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