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Net Income and Exchange Rate

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hamma13
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Iran I
Post: #1
Net Income and Exchange Rate

- State: USA I
- Quarter: 115 - Winter 2018
- GDP: 31.939,40 Bil. €
- Population: 442.797.933
- GDP/Capita: 6.010,91 €/month
- Tax rate: 30,64 %
- "Private Sector GDP"/Capita: 4.169,16 €/month
- Living costs: 1.874 €/month
- NIT-Reform ("The cost of living is subtracted from one half of a citizen's income and this amount is paid as a tax by every employee, or it is paid to them if it is a negative number. ..."): introduced, meaning that every citizen has at least the cost of living as net income
- Net income: 2.035 €/month ???

Can somebody please explain - preferably somebody, who knows the game's matrix?

- GDP: 31.939,40 Bil. €
- Money supply: 31.368 Bil. €
- Nominal interest: 1,96 %
- Inflation (annual average): 3,52 %
- Exchange rate: 0,56 $/€ ???

Can also somebody please explain - also preferably somebody, who knows the game's matrix?

23.09.2017 11:54
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MrProper
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Post: #2
RE: Net Income and Exchange Rate

This should probably be in the section for questions, not here.

hamma13 Wrote:
- State: USA I
[...]
- Living costs: 1.874 €/month
- NIT-Reform ("The cost of living is subtracted from one half of a citizen's income and this amount is paid as a tax by every employee, or it is paid to them if it is a negative number. ..."): introduced, meaning that every citizen has at least the cost of living as net income
- Net income: 2.035 €/month ???

On behalf other readers a small note: The negative income tax in this state was introduced at least 40 quarters ago.

Due to limits of the technical implementation, reforms always have an immediate and short term effect. In other words: The supposed changes are applied right after the introduction of the reform. From that point onward, everything may change (options you pick in tasks, reforms, budget changes, ...). In other words, it may happen at some point that effects of a previously introduced reform are partly, or evently reverted due to play style.


hamma13 Wrote:
- GDP: 31.939,40 Bil. €
- Money supply: 31.368 Bil. €
- Nominal interest: 1,96 %
- Inflation (annual average): 3,52 %
- Exchange rate: 0,56 $/€ ???

Can also somebody please explain - also preferably somebody, who knows the game's matrix?

It would be nice if you'd provide a question next time, since it is not alway obvious what the actual question is. I simply assume you want to ask "Why is the exchange rate so low?".

The low exchange rate reflects the current situation of your state. The economy is simply not growing as rapidly as your population does, due to immigration and high birth rate. That is causes the majority of problems of your state.
(Of course one has to keep in mind that Euro is the currency in every state, including USA templates, and Dollar just a reference for comparison)


Welt Kevin
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Per ardua ad astra“ - TheLastShah
23.09.2017 13:47
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hamma13
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Iran I
Post: #3
RE: Net Income and Exchange Rate

MrProper Wrote:
This should probably be in the section for questions, not here.

I think it should be here. How can my net income only be 1/3 of my per capita GDP (and don't say "because of taxes" because 1. I only have excise taxes which don't reduce the net income and 2. even after taxes my per capita GDP is 2times my net income)? Where does the rest of the GDP disappear to?

MrProper Wrote:
Due to limits of the technical implementation, reforms always have an immediate and short term effect. In other words: The supposed changes are applied right after the introduction of the reform. From that point onward, everything may change (options you pick in tasks, reforms, budget changes, ...). In other words, it may happen at some point that effects of a previously introduced reform are partly, or evently reverted due to play style.

What task or budget change could possibly reverse the NIT-Reform? I'm at a loss.

MrProper Wrote:
It would be nice if you'd provide a question next time, since it is not alway obvious what the actual question is.

You are right. I thought it was obvious. And you guessed correctly.

MrProper Wrote:
The low exchange rate reflects the current situation of your state. The economy is simply not growing as rapidly as your population does, due to immigration and high birth rate.

I still don't think this explains the exchange rate. At least longterm, exchange rate and inflation are strongly related to the quantity of money, which I constantly kept around the yearly GDP.

29.09.2017 08:19
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MrProper
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Post: #4
RE: Net Income and Exchange Rate

hamma13 Wrote:

MrProper Wrote:
This should probably be in the section for questions, not here.

I think it should be here.

I make this claim based on my experience with the game and it's implementation, which is why I think this is nothing more than a limitation by the game engine. However, I understand why you posted it here.

hamma13 Wrote:
How can my net income only be 1/3 of my per capita GDP (and don't say "because of taxes" because 1. I only have excise taxes which don't reduce the net income and 2. even after taxes my per capita GDP is 2times my net income)? Where does the rest of the GDP disappear to?

MrProper Wrote:
[...]

What task or budget change could possibly reverse the NIT-Reform? I'm at a loss.

I group these statements together, because my answer addresses both. No worries, I won't say because of taxes, but I will rephrase some things I said earlier.

As with every model, there are limitations to how good Ars Regendis models reflect reallity. I once read an official statement - unfortunately I can not provide a link this time - that there a many long term effects that could not easily be modeled into Ars Regendi. Therefore, there are some changes introduced by reforms which are permanent, while other effects are one time instantaneous changes. I will explain it with other reforms than NIT, because it is easier to illustrate.
For example, the privatized health care reform will cause a substantial drop in PE health. Health and life expectancy values will drop significantly (once) in the following quarter. With every winter term budget, you may however increase PE health again (with subsequent positive effects on live expectancy and health). Ultimately, you usually end up with better values than before for roughly the same spendings, which is why many player tend to introduce this reform.
Another, even better, example would be the employment reform. According to the description, it gives your citizen the right to work. Once implemented in your state, the reform causes a significant one time instantaneous drop in the unemployment rate. Afterwards, the rate may easily rise up to the previous level. Look at this plot from my state Scandza. I implemented the reform in Q212 with great success, but the value increased from almost 0 up to almost 60% within 10 in game years. Planned economy, however, has a mechanism that ensures are low unemployment rate once implemented. In Meraneshia, you can see this effect post Q225.

My point is that the NIT reform seems to have mostly one time effects. Once implemented, similar to the employment reform, there does not seem to be a mechanism that would ensure that the net income actually stays above cost of living. Every other in-game effect which may reduce the ratio between these two values apparently can not be stopped/prevented by the NIT.

As stated before, I always had the impression that a fast growing population reduces the net income over time whenever the economy can not keep the pace. I once analyzed this issue for a player based on his own states here, and the number seem to concur.

Most other problems your state has are probably just side effects from overpopulation. This includes the missing part of the GDP, likely due to the extremely problematic security statistics.

MrProper Wrote:
The low exchange rate reflects the current situation of your state. The economy is simply not growing as rapidly as your population does, due to immigration and high birth rate.

I still don't think this explains the exchange rate. At least longterm, exchange rate and inflation are strongly related to the quantity of money, which I constantly kept around the yearly GDP.
[/quote]If it be possible for us to look at the actual numbers and how they are calculated, a great many things would be easier. Thus I as well can only speculate.


Welt Kevin
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Per ardua ad astra“ - TheLastShah

This post was last modified: 29.09.2017 15:26 by MrProper.

29.09.2017 14:04
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hamma13
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Iran I
Post: #5
RE: Net Income and Exchange Rate

Thanks again. I just wished systemic failures/inconsistencies had a higher priority than new tasks, task options and other "minor" improvements (I read somewhere, I think it was Sheep, that it was the other way around).

29.09.2017 15:08
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