What might happen if an economy is unable to produce wanted goods and services?

What might happen if an economy is unable to produce wanted goods and services?

Answer

Inflation is considered to be a major reason behind the economy not being effective in producing the wanted services and goods. The levels of inflation can be related to increased demands for the services and goods that can exceed capacity of the economy related to their supply which leads to the increase in the pricing of goods. The purchasing capacity of consumers can decrease due to the rise in prices and this further leads to decrease in the purchasing power of the consumers. The reduction of economic activities of the consumers is considered to be an important factor that can influence consumer purchasing power. Inflation levels can prove to be hugely harmful for the economy as reduces the long-term planning and investment. The high inflation levels can affect the businesses that are not ready to make investments in the new projects or expansion of their operations as uncertainty related to the future prices can increase difficulty related to forecasting the profits. Unemployment is another important outcome of the inability of economies related to production of the services and goods. The increasing demands related to services and goods can exceed the rates of supply, rise in the prices which leads to cutting down of the costs and reduction of workforce. The high unemployment levels can be related to negative influences on the economy. The disposable income levels of the unemployed individuals are low and this leads to a reduction in the spending by the consumers. Moreover, the reduced demands for services and goods can lead to increase in the levels of economic decline. On the other hand, the unemployment levels can increase the social issues and the frustration of unemployed people related to the inabilities of finding work.

Economic stagnation is considered to be a major outcome of the inability that is depicted by the economy related to production of the required services and goods. The issue related to economic stagnation can occur as a part of the economic experiences during long periods of the low growth depicted by the economy. The developing or emerging economies are hugely influenced by the economic stagnation and it reduces their abilities related to achievement of the overall potential. The dependence of developing economies on high investment levels for increasing economic growth and lack of investments have a negative impact on their long-term growth. The economies that are unable to produce the required services and goods can have a major influence on the reduction in qualities of the lives for the citizens. The increasing demands related to services and goods in comparison to the levels of supply can increase the difficulty levels of the individuals related living the comfortable lives.

The reduced life qualities of individuals can lead to various adverse influences related to the economies. The enhancement in levels of the social issues can increase the frustration levels of the economies which are unable to develop the appropriate services and goods. The costs related to healthcare can increase due to the enhanced susceptibility of the individuals towards different diseases and illnesses. The poor conditions of living and reduced access towards the basic necessities are also related to the inabilities of economies. The economies which are not properly able to develop the required services and goods can face various negative results that can include the aspects like unemployment, inflation, stagnation of the economy and reduction of the life qualities of the individuals. The policymakers thereby need to make the decisions that are related to ensuring that economies can manufacture the service and goods that can enhance comfort levels of the lives of individuals. The policy decisions can also be related to the investments that are made in the promotion and innovation of different aspects of the economy.