How Economic Policy Affects The Individual, State, Nation, And World

1899 Words Oct 4th, 2016 8 Pages
How Economic Policy Affects the Individual, State, Nation, and World
“The government economic policy, measures by which a government attempts to influence the economy” (Anderson, Lindbeck, Morris, Poole, & Due, n.d.). “The national budget generally reflects the economic policy of a government, and it is partly through the budget that the government exercises its three principal methods of establishing control: the allocative function, the stabilization function, and the distributive function” (Anderson et al., n.d.). The economic policy greatly affects levels of taxation, government budgets, money supply and interest rates, labor market, and national ownership. All of which travel down the line and affect the people, the state, the nation, and the world in general.
Economic policy affects people in many ways. For instance, if taxes increase business and consumers both feel the hit. A rise in interest rates raises the costs to businesses of borrowing money, and also causes consumers to reduce expenditure, which ultimately leads to a decrease in business sales (“External environment theory,” n.d.). Furthermore, the decisions made from economic policy about taxation also affect businesses and consumers. For example, an increase in corporation tax on a business’s profits has the same effects as an increase in costs. However, businesses can pass some of this tax on to the consumers by raising prices (“External environment theory,” n.d.). Additionally, interest rates affect the…

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