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Economic policy

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Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:08 pm

Unfortunately, such recommendations are rarely foolproof. Because economics involves many complex interactions between various market forces. Thats the reason why, accurately predicting the outcome of an economic policy is tricky at best, impossible at worst.

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:10 pm

For example, expanding social welfare may create a safety net that protects workers from economic hard times and promotes upward mobility.

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:12 pm

The result is a wealthier population that will drive economic growth. However, the same welfare expansion may give some workers an incentive to stop working,

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:14 pm

This is one of the reasons why there will be the reduce in the government’s income tax revenue and slow economic growth in the country...

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:15 pm

Of course, the outcome may not be simply either/or. When offered welfare benefits, some people find incentive to work harder, while others find incentive to work less.

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:17 pm

The microeconomist’s task is to propose solutions to market failures that will result in the best possible outcomes despite unintended consequences.

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:19 pm

To determine the best policies, microeconomists attempt to predict how people will respond to the incentives, or disincentives, such policies will create.

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:20 pm

For example, an economist sees that a paper company has been clear-cutting too many trees in one area to make paper. For the company, cutting a large number of trees makes sense because it can produce its product quickly at a cheap price that consumers love.

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:22 pm

However, the economist estimates that if the unrestrained cutting continues, the trees will disappear and the company will go out of business within five years, leaving hundreds of workers unemployed.

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:23 pm

Construction prices in the area will also skyrocket due to lumber scarcity, and tourism will decline from the destruction of the land’s natural beauty.

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Re: Economic policy

Post by sujin007 on Thu Dec 06, 2012 4:25 pm

To prevent these outcomes, the economist suggests the local government should regulate the number of trees that can be harvested at one time.


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