Yahoo Answers is shutting down on May 4th, 2021 (Eastern Time) and beginning April 20th, 2021 (Eastern Time) the Yahoo Answers website will be in read-only mode. There will be no changes to other Yahoo properties or services, or your Yahoo account. You can find more information about the Yahoo Answers shutdown and how to download your data on this help page.

Lyle asked in Politics & GovernmentGovernment · 10 years ago

How is this for a very small model of economics?

Been thinking about a way to describe the Conservative approach to economics. "IE.: Lower taxes = increased revenue. Lower spending = Decreased deficit." This is what I have come up with.

You own a small chain of stores that sell anything. Imagine Walmart but roughly 1/25th the size. You know the economy is in a slump, you are not getting as much business into your stores so to fix the issue you decide to take actions to increase your stores revenue. You decide to decrease the overall price of everything in your stores by 10% and you do an add campaign informing the general public that you have done so. This should bring in the money that your store needs to stay in business.

Now, how does my theoretical model compare to the government? Let's talk about it. For starters the companies earnings are the governments revenue. The companies bills for the year is the government budget. The customers of the store are the citizens of the united states. The prices of goods purchased are the taxes levied by the government.

When the store is losing business due to the economy and decides to put up an ad campaign and a sale of 10% that increases the stores earnings by people feeling that they are getting a good deal and will shop in your store to gain the savings. The decrease in store prices is akin to a decrease in government taxes.

When people are saving the money they are going to spend more money. It is a sound business model. If this theory is true wouldn't the inverse be true? If the store decides during a down turned economy to raise their prices by 10% and higher more employees wouldn't the following be true? Higher prices means less people will spend money in your store. More money spent on employee's = less earnings for the store. Which means eventually the store will have to make real decisions to fix the trend. Which means either more taxes (higher prices) or just pray the store pulls through.

See any flaws in my theoretical model?

1 Answer

Relevance
  • Pretty-much just as thousands of years of history have proved - which is why not even one breathing Democrat is able to believe it.

Still have questions? Get your answers by asking now.