ECO 100 Final Paper Effects of taxes on the economy

1663 Words Oct 1st, 2014 7 Pages
Effects of Taxes on the Economy
Donna Ralston
ECO 100 Survey of Contemporary Economic Issues
Instructor: Frank Huber
July 14, 2014

What happens to the economy when the government raises or lowers taxes? Lots of people in America do not understand exactly what happens to the economy when the government raises or lowers taxes. In this paper I am going to address that question as well as a few other things such as: Describing the effect on net personal income when the government raises taxes and when the government lowers taxes. Describing how the Gross Domestic Product (GDP) is affected by higher taxes and lower taxes. I will also identify what other economic factors are affected when taxes are raised or
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To get everything produced by a country's citizens, no matter where they are in the world, you should look at Gross National Product (GNP), also called Gross National Income (GNI).” (Amadeo,K. n.d) Each month, the Bureau of Economic Analysis (BEA), an agency of the U.S. Department of Commerce, releases an estimate of the level and growth of U.S. gross domestic product (GDP), which is the output of goods and services produced by labor and property located in the United States.

Usually, a recession is when a slowdown in economic activity happens and can cause a decrease in jobs, as well as constricted credit for loans, and lethargic or disheartened sales overall. To be precise, a recession is defined as a decrease in the nation’s total economic activity (the GNP) for two or more consecutive quarters. We know when a recession occurs because it affects everyone. You might lose your job, be turned down for a loan that you normally could have gotten etc… The government intervenes by implementing the fiscal policy; it is a type of economical intervention where the government inserts its guidelines into the economy to either expand the economy’s growth or to contract it. They do this by fluctuating the levels of spending and taxation, the governments can directly or indirectly affect the total demand, which is the total amount of goods and services in the economy.
What other economic factors are affected when taxes are

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