It changes the allocation of resources. Let's play with some numbers. We will say that 5 people have the following monthly incomes [ 0, 500, 500, 2000, 3000, 4

It changes the allocation of resources. Let's play with some numbers. We will say that 5 people have the following monthly incomes [ 0, 500, 500, 2000, 3000, 4000] Our economy only makes one good: bread. There are 1000 loaves of bread produced. Assuming everyone spends all of their money, since there is a total of 10000 dollars, the price of bread will be 10 dollars. Each person can buy = [ 0, 50, 50, 200, 300, 400] Now, let's say in 2016, everyone gets 500 extra dollars from some outside source, giving incomes [ 500, 1000, 1000, 2500, 3500, 4500] There are now 13000 dollars. The price of bread will be 13 dollars. Each person can buy [ 38, 76, 192, 269, 346] Some people can buy more bread. Some can buy less.