Macroeconomics by Krugman and Robin Wells - Essay Example

One of the subjects of macroeconomics is a recession that has a major impact on the spending patterns of individuals as well as businesses. During a recession, business experience a tough time continuing operations as they experience a decline in their sales and to continue operations it even reduces its labor force to decrease the cost of operations (Krugman 145). 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 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 businesses to borrow more and due to these businesses invest more (Krugman 148).

But if the demand for goods and services continuously increases, suppliers will increase their prices on a continuous basis and this would lead to an increase in the inflation rate and a decrease in the number of goods and services that can be purchased by individuals in a particular economy (Krugman 153). Read More