Jan K asked:
I’m interested only in classical theory economics. I know that in this theory, the increase of money produces only inflation. What about the increase of tax rates? Does it increase prices or it just decrease investments?
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I’m interested only in classical theory economics. I know that in this theory, the increase of money produces only inflation. What about the increase of tax rates? Does it increase prices or it just decrease investments?
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Economics
economics
Any increase in tax rate would mean an increase in prices. About investment, it will be less bec. govt gives tax holidays for investor and they come in different scheme that is very attractive to investors.
Caffeinated Content
What it’s doing is shifting the spending power from individuals to the govn’t.
So innovation / business creation may go down, -if folks think they can’t keep what’s theirs.
Other than that, – it appears it’s a closed system. Money is not leaking in nor out of the system, – just who spends it, or who has it, and doesn’t spend it (investment).
If you actually talked about lowering interest rates, – then folks would ‘pull’ money from their own future, – and spend it today (more-so). Hence that would be an increase in the (virtual) money supply (today).
Kansieo.com
In classical approach, raises in taxes means a reduction in income available and a reduction in aggregate demand; by this way the inflationary pressures get free, example: if by 2008 were expected an inflation rate of 7%, with an anounces of raising taxes the expectations can put the inflation in 5%.
For talk about the investment, down the present situation, we have to entry to the dark route of economy and leave the classical approach