...The UK currently has a budget deficit of £80bn. It is forecast to fall to £0 over the next 5 years. Discuss whether the UK government should either raise taxes or cut government spending to ensure that the budget is balanced. A budget deficit is a state of financial health in which expenditure exceeds revenue and it usually results in the government having to borrow money. They government can use fiscal policy to correct the deficit and ensure that a balance is kept however, it also depends on what state the economy is in and whether trade-offs will occur meaning that some other macroeconomic targets are put in jeopardy. By reducing government spending, it’s a way of demand management. An advantage is that it reduces the dangers of crowding out the private sector. When the government spends or runs a large deficit, much of the spending is financed through borrowing which is done through government bonds. To make these bonds more attractive the government will offer a higher rate of interest on these bonds. In addition, government bonds are seen to be safer than private sector investments, especially if the government has a triple A credit rating. Therefore when the government offers bonds, investors provide their money to the government, reducing the potential investment for the private sector. Moreover, if the government borrows through the banks then the increased demand for repayable loans will increase, pushing up interest rates and also increasing the cost of borrowing...
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...The percentage extra that is paid on top of the principle amount owed for a loan or asset. Part Two When purchasing groceries, the flow of resources starting with the individual is cash out of their pocket to pay for the groceries they have purchased from the business. The business then uses that money to pay their suppliers for the products they place on the shelves, which the suppliers then have to pay for the raw products they use to make and package the finished products. The business also has to pay the required taxes to the government, which the government then uses to pay people that regulate the food and drug business as a whole. Those people also have to pay for groceries for their household, which continues the cycle the money flows through in the economy. In a massive layoff of employees, rather than putting money into the economy, there is the problem of people having less funds and resources, and relying on the government more for help. People that are laid off generally end up on unemployment and sometimes other programs like WIC, Medicaid, and Food Stamps. These people usually have a hard time finding a job that fits their qualifications or pays them comparably to the job that they used to have previously. This...
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...Paper Introduction Before actually being able to grasp all that economics has to offer it is important to understand the terms and concepts that are frequently used in economics. Some of the main terms that are essential to comprehend are: gross domestic product (GDP), real GDP, nominal GDP, unemployment rate, inflation rate, and interest rate. These terms are used frequently within the economic world and being able to understand the definition and be able to apply it in real life situations is important. It is also essential to think of real life situations and how a lack of money or an excess of money may affect the given situations. Buying groceries, massive layoffs, decrease in taxes, how would all of these things affect the government, households and businesses? Definitions What is gross domestic product (GDP)? This is simply the current market value of all of a countries products and services. It only accounts for the products and services within that country and made by that country. It does not account for any goods or services that they may have in other countries. What is real GDP? This is the value of all products and services within a country, however, unlike the above definition this takes into account inflation. So, real GDP is the value of all goods and services produced within a year, within a specific country, and it takes into account the inflation. What is nominal GDP? This is the value of all products and services produced within a country;...
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...“the ratio of the number of people seeking employment to the total labor force”. Inflation Rate – “the rate of increase of the general level of prices”. Interest Rate – “the return a saver receives in addition to the original amount she deposited (loaned) and the amount a borrower must pay in addition to the original amount he borrowed”. Part 2 In the following examples it will be discussed how each affects government, households, and businesses. Additionally how the resources flow from one entity to another for each activity will be shown. Purchasing of groceries: When society purchases groceries it increases the demand for those particular items. An example would be if one was to purchase a can of corn the company that manufactures that can of corn needs to produce another to meet the demand of the store to restock that can. To do this the manufacture of that can of corn would need more from the farmer that grows the corn. That farmer in turn would have to ask for more seed to grow the corn that is demanded. Additionally the farmer having sold more corn will be...
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...Nominal GDP This is a GDP measure that has yet to be adjusted for inflation. This is also known as the current dollar GDP. If inflation is not taken into account the GDP measure will seem higher than it actually is. Unemployment rate This is the percentage of people that are unemployed and not working but are actively looking for work. People who just receive unemployment or who are not working and not looking for work are not accounted for in this rate. Inflation rate This is the rate where the level of prices for goods and services is rising and the purchasing power is dropping. There are some banks that try and slow down or even stop major inflation from happening. While inflation rises, every dollar is worth less such as $1.02 for a $1 candy. Interest rate This is an amount that a lender will charge a borrower if exchange for an asset. These are usually annual rates. When someone with good credit or little risk there would normally have a better interest rate offered on the other hand, if high risk the rate could be higher. Part 2 The fundamentals of Macroeconomics if very...
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...Economics October 3, 2014 Mr. Dennis McGuckian Many Americans are unaware of the government activities that affect us every day. The economic activities have a major effect on the economy in any ways. If citizens were educated on them, things might change in their favor. “Economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society. One of the key words in the definition of the term “economics” is coordination” (University of Phoenix, 2013, p. 1). Government economic rules and laws are constructed to benefit the government and not the citizens. Many factors play roles in supply and demand. This paper will discuss a few different activities and how they influence the economy such as purchasing of groceries, massive layoff of employees, and decrease in taxes. Purchasing of Goods The purchasing of groceries affects the government, households, and businesses. The government determines the amount of taxed of groceries, which groceries can be sold and when they can be sold. Decreased taxes means less spending money for the government, which also means more debt they will accumulate. Households with low income are affected when taxes are high. Consumers are limited on the amount they can purchase, causing inadequately providing for their families. Families will then lean towards government assistance and other family member and the community for support. By this, many businesses...
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...activities on the government, households, and businesses. Gross Domestic Product (GDP) is the single most used instrument in measuring economic activity. The GDP is the total and final value of all goods and services produced in a market, measured over a one year span. GDP may also be referred to as the market value of final output. There are two types of GDP, real and nominal. Real GDP is referred to as the GDP that has been adjusted for inflation costs. Nominal GDP means the value was calculated at today’s existing prices. In order to calculate real GDP, you must have the nominal GDP and subtract the cost of inflation. It seems as that throughout Macroeconomics, nominal is always current or existing while real is adjusted for inflation. The unemployment rate is calculated as a percentage that is used to describe the amount of the population who want to and can work, but who do not have jobs. The inflation rate is the continual rise of the price level. It is important to note that inflation deals with the continual rise, it is not a one-time jump in prices. The overall increase in your year to year grocery bill is due to inflation, not the fact that Kool-Aid is 20 cents a packet this month when it was half that last month. Interest refers to the amount of money you must pay back in addition to your principle loan amount. Any interest rate is a certain amount calculated over a period of time. The interest rate macroeconomics deals with is the one that the federal government uses to control...
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...standard living of a country through its goods and services. These goods and services are produced by any given country in any given time. These goods and services are sometimes the primary source of economic stability of any given country. Real GDP is the market prices primarily on a specific year (Colander, 2010). One will focus on the purchasing of groceries, massive layoff of employees, and decrease in taxes affect the government, businesses, and households. It was once said by President Calvin Coolidge that “The business of America is business” (Colander, 2010). For most countries its economy is broken down in to three parts: the government, households, and businesses. We will cover each one briefly and explain how each one has an effect on the other. Household are the target of a business through its goods and services. In other word we are the consumers. Consumers are what make business thrive to success. Businesses are the primary source of goods and services. Their main objective is to sell to households and a government. Finally the government, they are responsible for making business with foreign countries and makes...
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...Jeffrey White PADM - 620 Local Political Administration Week 6 Assignment Instructor Dr. Bagwell Department of Public Administration American Public University What problems are incurred when judges are elected? Some argue that elected judges is a part of democracy or that they are representation of the people who elected them. The judiciary system is one of three tiers in our government which also include the legislative and executive branches. These three branches work together to provide the people with a check and balance system of government and that all three are equal in power and authority. However, some argue that popular election of judges is a bad idea, and it opens up the judicial branch to the same partisan and commercial pressures that the legislative and executive branches of government already experience (Kiplinger, 2013). The concern is that judges may be bought by those with money forcing them to make decisions in benefit to those who bribed them. Another issue with financial side of elected judges is that elections cost money. Very few judges bank roll an election from their own pocket, therefore they rely on donations and fundraising to pay for election campaigns. But can a judge remain unbiased and non-partisan if they were bank rolled by someone who was seeking judgments to benefit them directly or the market they work or own businesses in. An article published in the American Journal of Political Science, stated that the article was...
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...Module 4 Review Guide The sum of the production of goods and the supply of services in a given country is defined by the country's Gross National Product, or GNP. Many factors can affect the gross national product. Here are five major ones: 1. Population expansion or contraction - population growth can increase both GNP and per capita GNP. 2. Entrepreneurism - all the inventions associated with computers and other technological developments, have fueled a huge expansion in the GNP. 3. Trade – global trading increases GNP 4. War - Wars such as World War II destroyed much of Europe's economic infrastructure and drove down the GNP of the countries involved. However, for countries like the U.S. and much of Western Europe, which today supply military arms, war can have a positive effect on the GNP. 5. Natural Resources - The discovery of oil is a classic case of natural resources driving up the GNP of a region such as the Middle-East. Similarly, in rain forests around the world, harvesting trees has had a positive impact on the GNP. A business cycle is similar to the movement of a roller coaster. The four phases of the business cycle are (1) expansion, like the upward climb of the roller coaster. During the expansion phase, Gross Domestic Product, or GDP, is increasing. Usually, this also means that the rate of inflation is increasing while the unemployment rate is decreasing. The momentary pause at the summit is the (2) peak, where production reaches the highest current level. This...
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...has not been adjusted for inflation. Unemployment rate is the measure of how many people are working and not working in the economy. It is calculated as a percentage by dividing the number of unemployed people by the individuals that are currently in the labor force. The inflation rate is the percentage rate of change in price levels over time, usually one year. . All of these factors are related to our everyday lives and how we manage our money, what we spend our money on, and when we spend our money. Buying groceries sounds like a simple task but when you are on a budget it can be pretty stressful. The cost of groceries affects the government because they are taxed like all other purchases. Also, many people buy groceries with food stamps so this affects government spending. It also affects the inflation rate which can influence government policy. This is directly related to consumer spending and in times of a recession consumers pull back on their spending and go into savings mode. When consumers go into savings mode this affect every type of business because their revenues drop...
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...spending and to generate more income for the Government through tax. The main sectors for Government spending in 2013 were social protection, education and the UK healthcare system. However I think that the sectors that are cut back on need to be chosen carefully because if some sectors are chosen then it will do more damage to the country than good. For example, if the Government cut back on education then it will affect the level of skill that people have. This could mean that they are unable to obtain basic qualifications and therefore become unemployable because they have no skills. This would mean that more people would claim welfare benefits, such as Job Seekers Allowance, and therefore it would cost more to the Government than the initial cutback. Also I think one way of generating income would be to increase the duty on alcohol and cigarettes because they are inelastic goods (demand does not change when price does) and so people would carry on purchasing them no matter the cost. Also if people did stop buying them, then this would cause less associated health problems (such as lung cancer) and so this would put less pressure on the NHS and so would prevent extra spending. Another way to generate extra income would be to increase income tax for higher earners. This would mean that the Government receive more money because they would have to pay more tax. However this could mean that these people have less disposable income and so have less money to spend. In turn,...
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...economy consists of three major sectors: government, businesses, and households. Each of these entities play a very important role in the economy and each move from either group have a significant effect on the other. Businesses supply goods and services which are sold to governments and households. In order to produce these goods businesses rely on households to supply the labor for which they are paid. When these interactions are put together the result is the goods market. The relationship between each sector impacts the growth of the nation’s Gross Domestic Product (GDP). The purchasing of groceries has a great impact on households, businesses, and government. Households are more likely to hurt behind this transaction because everyone has to eat. Like anything else businesses prosper by providing these goods, but also have to stay competitive against their competitors prices. So if one store has the same product as the other for a much cheaper price household will most likely spend their money there and the higher priced store will end up losing business which means losing money. The government effects this transaction by regulating taxes on the goods. If taxes are too high households will not be able to afford to buy enough to feed their families. This will also affect the government by making them provide assistance to households with low income so that families will have enough for everyone to eat. In the event that the government has a massive layoff situation, all sectors...
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...households, businesses as well as the government. Everything what happens within an economy sets off a chain reaction whether its big or small. One negative reaction could lead to a whole line of negative reactions which impacts consumers, businesses, and the government and vice versa for the positive impacts. Economic Activities Gross domestic product (GDP) measures the complete market worth for products and services sold and bought by organizations and consumers within an economy in a years’ time. Nominal GDP is a form of real GDP but the difference is that nominal GDP creates room for inflation with in the economy. Interest rate is the percentage of added to an amount that has to be paid back but there are two kinds of interest rates which are nominal and real. Nominal interest rates are those that are inflated and cause your principle balance to be more than what it originally is. Real interest rate is the actual amount of what you would be repaying due to the inflation (Colander, 2010). Economic changes are measured in real GDP which reflects the market value of the products that are sold within the economy for the period of one year; this is a result of people producing and selling goods. Inflation rate is a direct result of continuous price increases; this reflects the continuous price increase of everything that is to be sold in the economy. Inflation could render the expansion of the economy because it makes it hard for the government to reduce things such as unemployment...
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...by basic events, one must gain a basic knowledge of the basic design of the economy for maximum effectiveness. To facilitate this learning process, this paper will describe some basic terms that are in most discussions surrounding economics. Once there is an understanding of the terms, the description will change to several scenarios, and how the result of a seemingly innocuous event has a ripple effect throughout the economy, affecting households, businesses, and government. Macroeconomic Terms There are a few very basic terms and concepts that one must understand when embarking on a discussion of macroeconomics. These building blocks will help one to understand why and how the economy works, and what effects of investment decisions, unemployment, and inflation have on the economy. Gross Domestic Product The Gross Domestic Product (GDP) is the value of goods and services produced in a country during a given year. To calculate GDP, it is necessary to add the total of all consumer spending, government spending, investing and net exports. Real GDP The Real Gross Domestic Product is the value of goods and services produced in a country for a given year once inflation has been taken into account. Nominal GDP The Nominal Gross Domestic Product is the value of goods and services produced in a country for a given year using existing prices. Unemployment Rate The unemployment rate is the percentage of the workforce that is currently not working. However...
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