Purchasing of Groceries
Purchasing of groceries is a kind of customer spending.
The per capita consumption statistics are tracked consumer spending and their structure. The expenses include all the costs of maintaining the standard of living (except for the costs of taxes and others. Obligatory payments); their value depends on both the income and the state of the consumer market, which creates opportunities for the realization of incomes.
What we have called the consumer spending of households in national income accounting system is defined as the personal consumption expenditures.
The main component of aggregate demand is consumption expenditures of households which include all the costs of the sector - from the cost of food and utilities to buy cars.
The influence of this factor on the amount of consumer spending at a given level of income, however, is rather doubtful. In the classical theory of interest, which was based on the idea that the rate of interest is a factor leading to equilibrium supply of savings and the demand for them, it was convenient to assume that consumption expenditure, ceteris paribus show the inverse relationship of the rate of interest, so that every increase the rate of interest will result in a significant reduction in consumption. However, it has long been recognized that the impact will ultimately be affected by changing the rate of interest on the readiness with which people spend on current consumption or that part of their income, is complex and uncertain, these changes drive the opposing tendencies, as some of the subjective incentives to acquire greater power savings with the growth rate of interest, whereas other motives weaken. Over long periods of time substantial changes the rate of interest is likely to significantly alter social habits and thus influences on subjective propensity to spend, although it is difficult to predict in advance the direction in which to carry out such influence. It is possible to find only in the light of experience. The usual rate of interest short term fluctuations is unlikely to have any way strong direct impact on the amount of expenditure.
Massive Layoff of Employees
Mass layoffs lead to an increase in the number of unemployed in a country. And the rise of unemployment also entails serious economic costs. One of the major negative effects of unemployment is that the job-free citizens do not produce products. If the economy is unable to meet the needs of the workplace for everyone who is willing and able to work, who are looking for work and ready to start working, we lose the potential for the production of goods and services. Consequently, unemployment hinders society to develop and move forward, taking into account its potential. Ultimately, it is considered as a slowdown in economic growth, increasing the backlog of volumes of the gross national product. Underutilization of productive capacity of society is possible to predict. For example, some economists believe that the excess of 1% of the real level of unemployment above the unemployment rate at full employment is a lagging real gross domestic product to 2.5% of potential GDP.
There is a backlog of GNP compared to the amount that society would be at its potential. There is an uneven distribution of costs of unemployment among various social groups. The qualification of workers is being lost. The well-known researcher of Macroeconomics Arthur Okun (USA) is mathematically expressed the relationship between unemployment and the so-called lag - not issued or irrevocably lost produktsiey15. This attitude, known as Okun's law, shows that if the actual unemployment rate exceeds the natural rate of 1%, a loss of gross domestic product is 2.5%.
For example, if at the beginning of the actual GDP was 100% of its potential volume, and then dropped to 98%, the unemployment rate is expected to increase by 1%. Okun's law expresses the relationship between the key markets of goods and labor markets. It describes the relationship between short-term movements in real GDP and changes in unemployment.
One of the major negative effects of unemployment - Out of able-bodied citizens and, accordingly, unreleased products. If the economy is unable to meet the needs of the workplace for everyone who is willing and able to work, who are looking for work and ready to start working, we lose the potential for the production of goods and services. Consequently, unemployment hinders society to develop and move forward, taking into account its potential. Ultimately, it is considered as a slowdown in economic growth, increasing the backlog of volumes of the gross national product.
Increase or decrease in economic activity are the main causes of growth and employment and reduce unemployment in the country. The cyclical development of the economy, the successive rise and fall of economic activity in a few years or decades lead to certain fluctuations in the number of employed and unemployed. So, when the economy exhibits a peak near full employment and production runs with maximum efficiency, it is expected that over time will decline in business activity, the decline in industrial activity and rising unemployment. After that, quite naturally comes the next stage - the revival of production, which again leads to increased employment to its maximum value.
Decrease in Taxes
Taxes have economic impacts on all subjects of the market: consumer, producer, the state budget. Lowering taxes for households allows it to increase the amount of consumable goods or to increase their long-term accumulation. The first occurs at low levels of consumption, the second - at a steady and high level of personal consumption.
The impact of taxes on the company manifests itself through changes:
1) the price of goods;
2) the volume of production;
3) payment of wages;
4) the funds allocated to development.
The economic situation in the enterprise determines the direction of the use of funds, emerging with a decrease in the tax burden. If the company is experiencing a decline in production, the tax reduction allows raising wages or working to reduce the price of the goods. The latter will spur demand in the market. The safe position of the company allows the gain from direct tax burden for the reconstruction or development of production.
The state budget while reducing tax revenues is reducing and, as a consequence, support for public-sector enterprises, government investment are also reduced. Conscious control of the state tax is called a discrete fiscal policy. Its purpose may be a change in the national production, employment, inflation and economic growth. The dynamics of taxes has a multiplier effect. However, the tax multiplier is always less, because the reduction of the consumption tax increases only partially (part goes to savings).
Discrete fiscal policy in a downturn focuses on reducing the tax burden, while inflation - on tax increases. In addition to the discrete policies, there is also automatic fiscal policy. It is an economic mechanism that automatically responds to changes in the economy through appropriate tax changes. In the period of active growth of the gross national product automatically reduces tax revenues (the sum seized income decreases, which leads to the growth of purchasing power, and as a result - is curbing the recession).
The role of taxes in the economic mechanism of the market often requires a fairly complex chain of analysis of economic consequences. This is different, and sometimes opposite results are in the short and long term.
References
Dornbusch, R., & Fischer, S. (1978). Macroeconomics. New York: McGraw-Hill.
Krugman, P., & Wells, R. (2009). Macroeconomics (2nd ed.). New York, NY: Worth.
