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P431 Economics Concepts

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Running head: ECONOMICS CONCEPTS 1
Economics Concepts
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ECONOMICS CONCEPTS 2
Question 1
Taking a look at the last few years government spending has been increasing. Though not
high as that record made in 2009 when there was recession in the economy, spending in the last
few years was very high. From the year 2008 the whole world was affected and it was in this
period that most nations suffered from a decline in economic growth and high levels of taxation.
According to Pine and Gilmore, (2011), the government has been using fiscal policy with
increased spending since this bad economic state. With more spending the government aims at
increasing the real GDP, reduce cases of unemployment and increase the income in many
households.
The government does not tax some of the households because their income is
below average and it would be a burden to them if they were to pay these taxes. The other reason
why the taxes are reducing is the fact that the government relies on other methods to cater for the
budget and not necessarily the taxes collected from the citizens. The main reason why the
government does not impose high income taxes is because these taxes reduce consumption
because the people have less money to spend. Reduced spending and consumption will not steer
economic growth and that’s what the government is targeting. Therefore, the only way to steer
economic growth is to increase consumption and this will be achieved when the income tax rates
are low. This is an advantage to the consumer who in turn uses the available funds to consume
more.
Question 2
The fiscal policy can be given the credit for the current state in the United States
economy though monetary policy also played an important role. Monetary policy was applied

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Running head: ECONOMICS CONCEPTS 1 Economics Concepts Institution Affiliation Date ECONOMICS CONCEPTS 2 Question 1 Taking a look at the last few years government spending has been increasing. Though not high as that record made in 2009 when there was recession in the economy, spending in the last few years was very high. From the year 2008 the whole world was affected and it was in this period that most nations suffered from a decline in economic growth and high levels of taxation. According to Pine and Gilmore, (2011), the government has been using fiscal policy with increased spending since this bad economic state. With more spending the government aims at increasing the real GDP, reduce cases of unemployment and increase the income in many households. The government does not tax some of the households because their income is below average and it would be a burden to them if they were to pay these taxes. The other reason why the taxes are reducing is the fact that the government relies on other methods to cater for the budget and not necessarily the taxes collected from the citizens. The main reason why the government does not impose high income taxes is because these taxes reduce consumption because the people have less money to spend. Reduced spending and consumption will not steer economic growth and that’s what the government is targeting. Therefore, the only way to steer economic growth is to increase consumption and this will be achieved when the income tax ra ...
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