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Unemployment, Excise Taxes and Money Supply

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Razick
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Post: #1
Unemployment, Excise Taxes and Money Supply

First of all, I hope the title isn't misleading because I'm posting three separate questions not one question about how excise taxes and inflation relate to unemployment. Wink

1) I want to gradually replace Income taxes with excise taxes. In the real world, I would implement policies to ensure that the system isn't regressive, but on here, obviously I can't do that. Will higher excise taxes be hard on my low income citizens?

2) My unemployment has been gradually creeping up and it's now just about my #1 priority (at 25%!). I have a lot of immigration and a high birth rate. I think part of the problem is that I'm not creating enough new jobs for my new citizens. I have been raising family spending, but obviously, that will take awhile to make a difference. I've just started raising tariffs to try to promote local business and lower imports (I don't like the idea, but I'm at the point I have to do something). I screwed up and ran a pretty big surplus for awhile which hurt my economy somewhat so now I'm trying to run a small deficit with the goal of regaining some of my lost growth. I don't want to go into debt though. Am I on the right track or should I do something else? Any tips?

3) I am trying to address my high inflation rate, which is stubbornly above 4%. I've been raising interest by the maximum amount every quarter but it keeps falling. When in the past I raised the money supply it seemed to add money to my treasury, so I'm concerned that reducing it will have the opposite effect (shredding money), am I right? I'm okay with spending some money on that, but I'll go into debt pretty quickly if I'm not careful with 1% of money supply being $10+ billion. Is there anything else I can do to address my inflation?

Also, on a related note, the inflation and real economic growth figures (I assume this one is quarterly economic growth adjusted for inflation?) don't seem to be related in any way to the figures on my "Overview" which pretty much never change... Would anyone mind explaining this?

Thanks!
I hope I'm not asking to many questions, but here goes another one: I want to raise welfare so that it's closer to cost of living, but I am concerned that this will lower incentive to work. Normally I would do it anyway, but will raising welfare make my unemployment even worse?

This post was last modified: 20.05.2014 23:30 by Razick.

20.05.2014 23:29
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Helsworth
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Post: #2
RE: Unemployment, Excise Taxes and Money Supply

The overview pages shows yearly average. I use the quarterly stats in the details tab to see inflation and real growth.

Your Money Supply is below your GDP; you need to keep it slightly above the GDP in order to make growth unconstrained. In real life, money is endogenous - it changes according to the private sector's behavior. The MS increases when the private sector contracts private debt - and the MS shrinks when those private debts are paid off or are defaulted upon.

You are running the India template state; alas, unemployment is going to be very hard to tame. You won't be able to do it by changing the budget - nor, I think, by implementing the subsidizing apprentice employment in the Apprenticeships task. The planned economy reform solves the problem of unemployment permanently, though. You might want to consider saving up Actions Points for it.

You have over 32 thousand people dying each quarter of starvation. You need to increase welfare and pension. As both are below the living cost.

Why would you want to increase the nominal interest, when you're running a budget deficit? You want interest payments to be low, not high. Also, in real life, one doesn't tame inflation by resorting to monetary policy. One uses fiscal means for that. More than that, you currency is pretty good compared to the average state.

Your debt to GDP ratio is 4,8%. That's absolutely nothing. You have more than enough room to increase spending and decrease taxation. At present the rest of the world is running a commercial surplus against you, and your fiscal deficit is not enough to shoulder the corresponding deficit. That leaves the private sector that shoulders the largest part of it by leverging itself.
It's basic double-entry bookkeeping (S-I)+(G-T)+(X-M)=0 In other words, the government deficit equals the net financial surplus/savings of the nongovernment sector to the penny in a given fiscal year.

In regard to the tariffs, you should consider implementing the protectionism reform. Focusing on taxing consumption more than labor might increase the GINI further - but that's your choice. Just focus first on increasing pensions and welfare. Implementing the negative income tax will also improve GINI, decrease crime, and increase economic growth.

PPS: In real life, unemployment is a monetary phenomenon, caused by government taxation. Government taxation creates 2 things: a constant demand for the government's money and unemployment of money paying jobs. Public spending employs the unemployed previously created by taxation. As such, the unemployment rate is a government policy choice - whether the citizens or the politicians are aware of it or not. So long as there is unused resources and unemployment (people willing and able to work) - the government is either spending too little, taxing too much, or both. In short, the fiscal deficit is not the right size to achieve and sustain full employment.
Voluntary unemployment is not a concern.
Now, in Ars-Regendi, unemployment and economic growth are pretty much linked in an inverse-proportional way. Thus, economic growth in the smaller templates (GDR, India, Iran, Russia, Columbia etc) correlated with higher unemployment. So in short, the answer to your question is no. Increasing welfare won't further increase unemployment.


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This post was last modified: 21.05.2014 07:43 by Helsworth.

21.05.2014 07:39
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Mr Deeds
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Post: #3
RE: Unemployment, Excise Taxes and Money Supply

When you mentioned "to increase welfare and pension" which sign do I need to use for the Money Supply category if I want to increase the amount of money supplied to the sectors, -1% or the +1%?

The confusion comes in at the point of interest. I see the +1% sign and it appears to have one of the two following effects:

1. Adding a +1% to increase the money supplied to the sectors.

OR

2. Adding a +1% to increase the taxes impinged on this category. Ultimately, reducing the money supplied.

21.09.2014 00:43
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Helsworth
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Post: #4
RE: Unemployment, Excise Taxes and Money Supply

Mr Deeds Wrote:
When you mentioned "to increase welfare and pension" which sign do I need to use for the Money Supply category if I want to increase the amount of money supplied to the sectors, -1% or the +1%?

The confusion comes in at the point of interest. I see the +1% sign and it appears to have one of the two following effects:

1. Adding a +1% to increase the money supplied to the sectors.

OR

2. Adding a +1% to increase the taxes impinged on this category. Ultimately, reducing the money supplied.

In the budget tab you have the possibility to increase allocated budgets or decrease them. The same is with taxes; you can increase them or decrease them.
When increasing or decreasing a percentage, remember that the percentage you chose will change the percentage.
So if you have excise tax of 20%, for instance, and you increase the tax by 5%, it means...
20x5/100=1 (1 is the actual change you've made)
20%+1%=21%


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21.09.2014 11:52
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hamma13
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Post: #5
RE: Unemployment, Excise Taxes and Money Supply

Helsworth Wrote:
In real life, money is endogenous - it changes according to the private sector's behavior. The MS increases when the private sector contracts private debt - and the MS shrinks when those private debts are paid off or are defaulted upon.

It's both I would say as it is also dependent on monetary policy.

Helsworth Wrote:
Also, in real life, one doesn't tame inflation by resorting to monetary policy. One uses fiscal means for that.

I think one does. One can increase money value by reducing money supply (monetary policy) or by increasing money demand (fiscal policy).

Helsworth Wrote:
At present the rest of the world is running a commercial surplus against you, and your fiscal deficit is not enough to shoulder the corresponding deficit. That leaves the private sector that shoulders the largest part of it by leverging itself.
It's basic double-entry bookkeeping (S-I)+(G-T)+(X-M)=0 In other words, the government deficit equals the net financial surplus/savings of the nongovernment sector to the penny in a given fiscal year.

Could you explain? I figure S=Savings, I=Investments, G=Government spending, T=Taxes, but what are X and M?

Helsworth Wrote:
Implementing the negative income tax will also improve GINI, decrease crime, and increase economic growth.

Does the NIT-Reform have its effects even if I've reduced acquisition taxes close to Zero?

Thanks in advance.

30.06.2017 09:34
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JulijsCezars
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Post: #6
RE: Unemployment, Excise Taxes and Money Supply

Mr Deeds Wrote:
When you mentioned "to increase welfare and pension" which sign do I need to use for the Money Supply category if I want to increase the amount of money supplied to the sectors, -1% or the +1%?

The confusion comes in at the point of interest. I see the +1% sign and it appears to have one of the two following effects:

1. Adding a +1% to increase the money supplied to the sectors.

OR

2. Adding a +1% to increase the taxes impinged on this category. Ultimately, reducing the money supplied.


You are adding 1% to increase money supply.

30.06.2017 13:49
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