Macroeconomic Theory Essay

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Macroeconomics theories are scientific theories that provide policy recommendations that could be used to improve the performance of the economy and to correct macroeconomic problems (Dadkhah, 2009). These theories were developed to give insights about economic problems experienced by countries and regions. They have implications concerning unemployment, inflation and the gross domestic product (output). Such theories include classical economics, Keynesian economics, aggregate market, monetarism, new classical economics and IS-LM analysis. Arnold explains extensively application of supply-side macroeconomics theory to describe its implication in fiscal policy in the economy. The theory suggests that fiscal policy can produce real
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The increased and reduced levels of taxation have a direct effect on the state of the economy. A cut or reduction in tax rates in a country reduces the amount of taxes households remit to the government. The amount of remitted taxes depends on household income. This increases their disposable income. The increase disposal income enables households to spend some of this extra income on purchasing goods and services expanding companies supply rates or spend the income on investments, thus creating the supply for job opportunities and sometimes save the remaining income. Their increased spending leads to a larger consumption in the aggregate economy facilitating the circular flow of income. Companies that produce the much-needed goods and services for the increased demand have to subsequently increase their production. An increase in production to cater for the growing demand for goods and services may result in the supply for job opportunities increasing taxes remitted to the government. All these translates in the further increase of income levels and output in the economy. When the economy of a country expands, the amount of taxes paid to the government increases accordingly thus facilitating economic growth. However, if the demand for goods and services tend to cause prices to shoot…show more content…
Deregulation has been believed to raise levels of competitiveness and a sustainable free market leading to increase in productivity (Dougherty & Yahmed, 2017). Deregulation also leads to improvement of social welfare. Companies that have invested overseas have been subjected to deregulation which involves reducing government interference on companies that relocate to the United States to curb the unemployment rate in the country which reducing their cost of operations. Deregulation has also initiated supply for innovation and entrepreneurship leading to the improved quality of goods and services. It has also facilitated supply by encouraging market entry making producers have less control over their competitors. Deregulation reduces the taxpayer income supply to the government because of the abolition of regulatory agencies where taxpayers initially paid for their operation costs, thus improving the economy. The reduced tax rates enable taxpayers to increase their spending habits because of the increased supply of money. Deregulation also lower prices for goods and services while increasing supply through the availability of various products and services in the market leading to increased consumer choices. Deregulation also has an impact on the market forces. Since the market is free producers can always
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