6 Essay Example | Topics and Well Written Essays - 250 words

6 - Essay Example Laying off workers will result in unemployment loop that is going to reduce the demands further. From an economist’s point of view, the key indicators of goods and services are government purchases, net export, investment and consumption. As for consumption when the consumers are scared of spending, it is likely to spike of an economic crisis. The main reason people are scared to spend is because of the economic uncertainty. When it comes to investment, normally a reduction in consumption will also come with come with an increase in investment, however, with a decrease in cost of mortgage people tend not to invest. A reduction in the price of goods that are both exported and imported tend to lead to a general reluctance of people to invest. According to Keynesian theory, the government should spend more on things that are to make people spend more money (Mankiw, 2008). Generally if Keynesian theory is to be observed, one should take a keen look on these four factors and how they relate to an economic