IRS employees would most likely lose their jobs under a flat tax system (Meehan). Many believe that a flat tax system reduces tax for, and actually benefits, high-income earners (Meehan). For example, if the tax rate were 10 percent, then someone making $1,000 would have $900 spending income left after taxes. Someone who makes $10,000 is left with $9,000 after taxes; this inequity is thought to prove that a flat tax disproportionately benefits the rich (Meehan). If the rich paid less tax, many believe that the government would lose significant revenue
As the capital is put back into the economy the demand for supplies will go up. As the demand rises the amount of supplies will also rise increasing the need for employees and in turn putting more available spending capital in the hands of the buyers. By increasing government spending there is more money being put back into the pockets of the people. This return in turn frees up capital citizens are able to put back into goods and services increasing demand. Lowering taxes can also leave money in citizen’s pockets but it also takes away from the amount of money the government is able to use to stimulate the economy by spending.
These manufacturing methods can be replicated by other businesses in the countries and improve their ability to manufacture goods. This improved ability to manufacture within the country and should lead to an increase in the GDP of the country. This will improve the trade and relations between the country and many others. Also in some cases these MNC's will invest in the infrastructure of the country. This will improve the trading process for not only the company, but also the rest of the country.
To increase their taxes would be appropriate and this would be stream lining taxes at a time when the economy needs a boost. The Keynesian economists would look at government spending as a means for the government to stop the little growth the economy has had and is to have. The government spending would make it so the people would not have the money to spend within the states and they would have to go without needs and desires. This in turn would be the money that could be used within the economy.
* Lowering banks’ interest rates. This will increase the consumer consumption as they will borrow at lower rates and therefore it will encourage them and business owners to investment more and increase the economy growth. * The government should increase their spending. This will increase the flow of money in public and private sectors which lead to empower businesses and bring people back to work after the
Dollar General Case Analysis Political forces affecting the Industry Political forces attempt to influence the activities industries undertake by exerting legislative powers to gain or create desired activity levels of a given industry, however this is not a unilateral attempt as industry representatives through lobbyists seek to gain favorable position in the industry by petitioning political representatives equipped with ability to grant such position, this shapes the macro-environment affecting the discount retailing industry. Taxes The question of who pays taxes and what’s a justifiable amount has become polarized as a result of the recently concluded general election. In any industry where gross margins are correlated with household incomes, taxes levied on households results in a reduction of the amount individuals and families has to spend, and consequentially the underline effect on enterprises in the discount retailing industry is less consumer expenditure directed to stores. The level of corporate taxes imposed on industries dictates the level of investment activities which could result in loss opportunities. Both buyers and sellers are worse off when goods are taxed (Mankiw, 2008).
The increase in real GDP would put downward pressure on the price level and reduce inflation. Supply-siders also believed that the budget deficit would not increase substantially as a result of the tax cut. Even if it did increase, it would be offset by increased saving due to the lower taxes. Many economic critics today and in the 1980’s questioned the effectiveness of Reagan s policies, also known as Reaganomics. Economists still argue whether Reagan’s actions were helpful or harmful to the United States economy.
This does not mean that the government will not invest in educational programs; this just means that the investments from the fiscal policy will be less than compared to infrastructure. Four key elements that were utilized in the simulation and emphasized in the lecture were inflation, recession, unemployment rates, and inflation tax. By inflation we can describe the rapidly increase of prices in the, Erehwon, economy and the decline of salaries, another manner to describe inflation can be the rapidly rise of prices and how incomes have stayed the same, making the consumers purchase less items for the same amount of money or more than before (about.com). Recession can be described as the GDP growth goes negative over a period of two or more consecutive quarters; in addition, current unemployment rates, consumer confidence, and spending levels are all part of the factors taken into consideration when dealing with a recession (recession.org). The factors which contribute to a recession and sometimes a depression are: increase in cost of production, higher costs of energy, and the national debt among many others.
Therefore, understanding exactly how monetary policies will affect the economy is extremely important. Monetary policies generally will raise or lower interest rates, which will ultimately affect individuals and business demand for goods and services. Unfortunately, many individuals do not understand the entire concept surrounding the Federal Reserve real interest rate. For example, any magnitude of decreasing the real rates will lower the cost of borrowing; this will increase investment spending, and influence individuals to buy durable goods. These items may consist of automotive, recreational vehicle, homes, and higher educational opportunities.
Decreasing the interest rate effectively increases consumer and businesses consumption. Lower interest rates also increase investments and net exports (Hubbard, 868). These increases push true GDP back in line with potential GDP and, as a result, production increases. This increase in production also increases the need for workers, ultimately increasing employment. Conclusion The Federal Reserve is a very powerful entity and has a large amount of influence on how our nation’s economy performs.