Question

How do productivity, price level changes, and employment levels affect the economic stability of a country?/Contemporary business 14th edition book.

Answer 1

Productivity, Price level changes and employment are macro economic factors effecting an economy and the stabiility of a country.

Productivity has direct relationship with the growth of a country since it is said, that higher the productivity, higher the GDP and growth of economy and lower productivity, lower shall be the GDP index and economy is believed to be slower. Therefore it is vital that every individual contributes to the growth of economy by incremental productivity.

Similarly price changes due to inflation or recession shall also have impact in the stability of a country since uncontrolled inflation shall lead to increase in prices and therefore lead to high cost of living, similarly in case of recession, the price of products shall fall and thereby lead to decline in value of currency. Thus government should keep a check on the fluctuation in the prices. Price and demand shall have inverse relationship. Increase in prices shall reduce the demand for product and similarly decrease in price shall increase the demand for the commodity.

Employment levels shall have direct relationship with the stability of a country. Higher the employment opportunity, higher is the growth similarly lower employment, lower shall be thr growth.