THE ECONOMIC ENVIRONMENT IN THE UK

The Economic Environment in the UK

The Economic Environment in the UK

Introduction

Fiscal policy decisions on the daily decisions and behavior of individual households and business have a common effect - so that we can note the main macroeconomic objectives of fiscal policy and aggregate demand and fiscal policy before considering the links between microeconomic consider some of the effects.

1. Fiscal Policy and Unemployment

Can changes in the income tax affect the incentive to work? The economic literature continues to be a controversial subject. An increase in the basic rate of income tax or national insurance contributions considers the effect of an increase in the rate. (Graham, 2001, 67) each hour of work taken by a direct tax increase because the total net income after tax income reducing effect is now lower than those in business. This is his goal to work more hours to protect the individual may be encouraged. In contrast, the effect of high taxes may act as a disincentive to work since the may be less work to promote. Of course, working hours, many workers have little flexibility. They are a certain number of hours of work will be contracted directly to changes in tax rates does not change that. (Keynes, 2007, 21)

Income tax for low income earners the government has introduced a lower starting rate. These people work extra hours and earn more than what they are designed to provide an incentive to keep. Extra hours of labor supply of low-income households, I see very little net financial benefit - changes in tax and benefit system in the 'poverty trap' aims to reduce the risk. Increase the tax and benefit reforms have encouraged an increase in labor supply, and why, and unemployment (NAIRU), and balance and thereby reduce the rate of non-inflationary growth rate will help increase the economy.

Fiscal policy can be effective in reducing unemployment. In a recession, expansionary fiscal policy, higher output, leading to the creation of more jobs, why the AD will increase. Fiscal policy not only causes a transient increase in real output. In the long run, expansionary fiscal policy and inflation causes not only do not increase in real GDP. Classical economists, this (Hayek, 2009, 40) (such as trade unions and reducing power) increases the flexibility of labor markets is necessary to use supply-side policies to reduce unemployment claims

The supply of fiscal policy can not solve unemployment. If frictional or structural unemployment, fiscal policy will not solve this. For example, suppose that some of the older miners unemployed. The problem here is lack of skills and geographical immobilities. Therefore, supply side policies are what are required. AD and to increase economic growth does not solve skills mismatch. Therefore, the classical economist is true that the economy is at full capacity. My criticism of the classical model, each time the economy reaches full output in the long run, is that in this case.

The effect of fiscal policy and the national economy in order to watch a government which sets ...