Glasvania, a European country, experiences a period of economic downturn that results in high unemployment. With most of its citizens out of work and having limited money to spend, the country's economy is dictated by low sales. Given the situation, all buyers are compelled to reduce their prices by a large margin. This scenario exemplifies

Relationship between Unemployment and Purchasing power

Explanation:

The unemployment affects severely the choices of the customers because if the maximum number of customers are not employed then it means they have fewer amount to spend and what the customer would do will be spending less and trying to save maximum. This severely affects organizations who offer luxury products. So high purchasing power is a great motivator for the firms who consider entering the market. If the people have greater purchasing power then they are more likely to spend more and vice versa.

a. money supply  

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