Essay: Macroeconomics-Wages and spending

11 Oct

Essay: Macroeconomics-Wages and spending

Sample Essay

In this thought, Keynes argued that determination of wages was not easy. He proposed that in order to boost employment, real wages had to go down which would cause a decrease in the nominal wage. Demand for goods would drop due to reduced consumer demand. This leads to a drop in business sales leading to a drop in revenues and expected profits. New investments will reduce resulting from the risky environment (Blinder 5). This implies that reducing the wages in any economy will result in a more pathetic situation of an economy. To avoid such situations, economists should focus on methods that they can use to improve the wages of employees although that would slow down employment.

A slowdown in employment rates but with an improved investment base serves more to promise a stable future. This means that more people will be employed in the near future although at a much slower rate (Blinder 6). The general economy will become more stable with time as many people will have jobs with more comfortable salaries thus establishing a long-term strength of the economy.

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