Economic Activities Essay

706 Words Aug 28th, 2013 3 Pages
Economic activities occur continuously. From buying groceries, experiencing massive layoffs, and decreasing taxes everyone is a part of the economic process. These things have an effect on government, business, and households. This analysis is a simplification of a complex process.
Buying Groceries
At first glance buying groceries is a simple task. One goes to the store and makes purchase; returns home and consumes the groceries. This activity involves more than a simple purchase. The government sets the tax rate the grocery is responsible for. The grocer collects that tax from the consumer at time of purchase and forwards it to the government. The government regulates the quality and standards of the product that the grocer purchases
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This means fewer taxes are being paid in not only from less people working, but also from the current workforce.
If the layoffs become long-term or permanent consumer spending will decrease. If spending decreases businesses experience a decline in profits and revenue. Government receives fewer taxes from businesses. Additional layoffs may become necessary. This is a downward cycle.
If demand for products is lessened, businesses stop producing and lower pricing to reduce inventory. Demand should increase causing pricing to increase. Jobs that were previously cut should become available once again. This is part of the business cycle.
Decreasing Taxes
If business taxes decreases fixed cost for business decreases. Operating cost is less and the business has more money. This money can be put into circulation which benefits the economy. Sometimes this extra money is used to pay down debt or is put into reserve thereby not benefiting the economy.
When household taxes are decreased this provides additional monies for purchasing, saving, investing, and paying down debt. If the household spends the additional money this goes back into circulation and benefits the economy. If households save or invest the money it does not go back into circulation and does not benefit the economy. The same applies to a household paying down debt. This is not a new purchase it is an existing purchase and will not show up in the

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