Government and the Macroeconomy
The country's government plays a large role in the economy. Government policies on employment, taxes, and spending affect not only the economy of the nation, but also the economic stability of individuals and corporations. This report delves into these policies and how they may relate to a corporation. The corporation used in all comparisons is Domtar, Inc., a large producer of forest products, such as specialty and fine paper, in North America.Government Stabilization of the Economy The government, including the President of the United States, uses economists to aid in inventing a countercyclical policy, fiscal and/or monetary, to moderate the severity of the business cycle. These economists often arrive at different and conflicting conclusions and recommendations. Inflation and unemployment are the most demanding macroeconomic issues that these economists have to deal with. There are five basic schools of employment and inflation: Classical, Keynesian, Neo-Keynesian, Rational Expectations, and Supply Side. The classical economics school of thought emphasizes the natural tendency for an economy to move toward equilibrium at full employment without inflation and argues against
The coexistence of inflation and unemployment referred to as stagflation, led to the creation of the neo-Keynesian school. Workers will work more and spend more, which actually increases tax revenues. As stated before, Domtar workers are in a labor union. If they get the wages increased, they company may increase prices to maintain profit (inflation). These methods include commandeering resources and creating a tax system. If the government lowers tax rates, a company like Domtar has greater incentive to increase production. In this program, income is transferred from the young (who pay into the trust fund more than they receive from it), and the old (who receive more from the fund than they pay into it). The country's government plays a large role in the economy. People receive unemployment insurance payments, which counteracts the downward momentum of the recessionary phase of the business cycle. In a tax system, in a sense, the government commandeers money, not resources, from the citizens and businesses and uses this money to purchase what it needs from the market. Commandeering resources is a very direct route not very often used in modern society. For example, say the average worker makes $6/hr, and there are 10,000 available workers. This is true; as long as there is a demand for public goods, there must a tax to pay for those goods. Unemployment insurance is paid by employers for their employees as a percentage of their pay. They argue that through tax reductions, spending cuts, and less government regulation, the government creates the right incentives for the private sector to increase aggregate supply.
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Acceptance Essays
