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Inflation and Unemployment. Between a rock and hard-place!

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Kickass Q.
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Inflation and Unemployment. Between a rock and hard-place!

In my nation Commiestan I'm facing a very difficult problem to tackle. Inflation is dangerously high, and unemployment is continuing to rise at a frightening pace. I'm doing all I can to boost capital investment to tackle both problems, and I've been raising the interest rate when possible to off-set the inflation, but alas I am in quite the quagmire! Would anybody review my nation and lend any advice on getting both under control. I can't afford to raise welfare to stop starvation, and I can't risk more starvation from lowering it, and I need to keep high growth and investment to keep with the birth-rate. I'm considering drastic measures such as taxing automation, but the risk of inflation worries me. Any advice?

This post was last modified: 23.07.2011 20:47 by Kickass Q..

23.07.2011 20:46
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Helsworth
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Post: #2
RE: Inflation and Unemployment. Between a rock and hard-place!

Your state looks great. In my view inflation isn't that high. You're covering it by having decent real (inflation indexed) economic growth. Your national debt is so low compared to your GDP, increase welfare and increase pensions. Don't let your people starve. To stimulate labor you could even decrease the income tax. Also if you want to highten your nominal interest a little in one quarter, do money reform I.


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This post was last modified: 23.07.2011 21:01 by Helsworth.

23.07.2011 21:01
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BaktoMakhno
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Post: #3
RE: Inflation and Unemployment. Between a rock and hard-place!

Your excise taxes are extremely high. Cutting them will counter inflation and likely stimulate demand, creating more jobs.


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23.07.2011 21:46
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Helsworth
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Post: #4
RE: Inflation and Unemployment. Between a rock and hard-place!

BaktoMakhno Wrote:
Your excise taxes are extremely high. Cutting them will counter inflation and likely stimulate demand, creating more jobs.

His excise tax is not high at all. If he decreases it, he will stimulate more consumption and implicitly inflation. He should focus on bringing pensions and welfare more in sink with the living cost, not trying to decrease it via fiscal means.


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23.07.2011 22:02
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BaktoMakhno
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Post: #5
RE: Inflation and Unemployment. Between a rock and hard-place!

It is considerably higher than for the average state. More consumption means more demand and more jobs. Yes, this can create inflationary pressure, but reducing excise taxes also directy reduces the price level (inflation).

Of course, if I were him I would increase welfare and pensions as well. I agree with all your advice except lowering income taxes - that would definitely increase inflation by increasing disposable income. I would lower excise taxes instead with the same aims in mind.


"The beauty of free trade is that 1 and 1 can be 3" - Titian

"There is no conversation more boring than one where Globaltom speaks" - Triniterias

This post was last modified: 23.07.2011 22:10 by BaktoMakhno.

23.07.2011 22:07
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Helsworth
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Post: #6
RE: Inflation and Unemployment. Between a rock and hard-place!

BaktoMakhno Wrote:
It is considerably higher than for the average state. More consumption means more demand and more jobs. Yes, this can create inflationary pressure, but reducing excise taxes also directy reduces the price level (inflation).

Of course, if I were him I would increase welfare and pensions as well. I agree with all your advice except lowering income taxes - that would definitely increase inflation by increasing disposable income. I would lower excise taxes instead with the same aims in mind.

Deficit spending is his only choice to save people from starvation. I guess excise tax is kinda high for an indian template state and a reduction of it, combined with increasing welfare/pensions will better lower death from starvation. I still maintain that a reduction in income tax will lower his unemployment, though it depends what kind of economic task options he chose in this respect. Labor must be encouraged, because if it is, people will have an incentive to save, especially if they can secure their household consumption.


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This post was last modified: 30.07.2011 09:59 by Helsworth.

23.07.2011 22:36
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BaktoMakhno
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Post: #7
RE: Inflation and Unemployment. Between a rock and hard-place!

Would you like alliance assistance?


"The beauty of free trade is that 1 and 1 can be 3" - Titian

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30.07.2011 09:51
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