A increase in income tax Essay Example | Topics and Well Written Essays - 250 words

A add in income assess - Essay ExampleAs explained above if consumers cut back, the suppliers will reduce production while place off workers, and then consumers will have counterbalance less money to spend in which slipperiness the cycle will repeat and thus begins a recession/depression like sequence.Consumers lose the close to from this in the farseeing term as explained, purchasing power will continue to drop and more or less workers will eventually lose their jobs which can send more shockwaves through the economy.Example In the housing bust, consumers lost their jobs in the recession and were not able to pay for mortgages, thus defaulting. Banks then reduced their add and consumers continue to reduce spending. Due to this suppliers had to cut their supply and more workers had to be made redundant. This cycle continued and spread throughout not only the United States but the world as banks defaulted on their debt.3) If the governance is attempting to increase governme nt revenue an alternative is to decrease the tax rate to a maximized level where businesses and consumers would indispensableness to spend more and thus cause more revenue in the long term and the government would be receiving more revenue than at the previous tax rate.4) A tax rate increase definitely affects the GDP and GNP due to the loss in production the aforementioned cycles would create. In the unmindful run the tax increase doesnt affect the GDP and GNP but in the long term Consumers would spend less and thus suppliers would produce less and lay off workers, and consumers would spend even less creating a vicious cycle that causes a