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Fiscal policy is the use of taxation and government, in order to control and influence the economy. This paper will focus on Apple Inc., which is a firm that deals with consumer electronic goods. Apple Inc. designs, manufactures and sells electronic goods and equipment, such as; computers and other related devices, video cassette recorders, cordless and cellular telephones, television systems and compact disks among many other goods (Mankiw, 2003).
If the government imposes a 95% tax cut on all the households, it would have a positive impact on Apple Inc. This is because this tax cut by the government would lead to an increase in the disposable incomes of the households. This increase in the disposable income would make the households spend more on consumption of our firm’s products, where the consumption would further lead to a rise in the aggregate demand for our firm’s products, because the consumers demand more from our firm’s products, because their incomes are high enough to spent. On the supply side, these tax cuts by the government are usually aimed at the stipulation of capital formation, since it would shift the aggregate supply and aggregate demand, because the actual price levels of our firm’s products would be highly reduced, which shows that there is a continued increase in the demand for our firms products (Mankiw, 2003).
The tax cut can be used to stimulate the economy, because, in most cases, it is usually aimed at encouraging the consumer spending. The consumers can decide to spend some part of their disposable income on the purchase of our firm’s products, which would symbolize that there would be an increase in the marginal sales of the firm. This increase in the total sales shows that the firm would increase its profit margins at a very high rate. This would make the firm be successful, since it would be able to attain all its objectives, which are to increase the sales levels and the profit maximization goal.
Trade policy is one of the most important tools that the government uses in the regulation of import and export. In trade policy, there is the use of rules and regulations, like the imposing of tariffs on imports, export subsidies and trade restrictions. The government can use trade policies, to be able to protect its domestic industries by placing the entire burden on the importers. This can be very advantageous to our Apple Inc. firm, since it is a domestic firm and if it is protected from the importers, it would mean that the firm would prevail in the market, and it would also sell its products at a very low price, which would be affordable to a majority of its customers, which would further lead to an increase in the total number of sales.
Trade policies are very important to my firm, because being a domestic firm our firm is protected from all the stiff competition from the imported goods which can make the firm decide to outsource all of its productions in other foreign countries, which may lead to an increase in the unemployment rates. The subsidies, which are offered by the government as a motivation for the exporters, would also benefit our firm, since the exports would be cheaper and the costs which would be incurred would be extremely low.
The trade policies also play a very important role in protecting the consumers by the restriction of products, which may be considered to be harmful to the population. Free trade is very beneficial to a majority of consumers through the reduced prices of the commodities and the increase in the choices of the commodities, but it has a negative impact on the domestic industries, where a majority of the government have to impose tariffs and trade barriers, which are mainly aimed at protecting the domestic industries (Bhagwati, 2002).
The implementation of a tariff by the government can be considered as a contractionary fiscal policy. This is because a tariff is a tax which is levied on all the goods, which are imported by the government. This shows that the government heavily taxes these imported goods, which implies a tax increase on these goods (Friedman, 1997). The contractionary fiscal policy’s main goal is to be able to close the inflationary gap, reduce the inflation rate and also to restrain the economy.
The contractionary fiscal policy usually involves the increase in the tariffs, which are imposed on all imported goods, where this increase in the taxes would provide the importers with disposable incomes, which they could use to import goods, and it can further lead to the reduction of the aggregate production and employment, which could further lead to a reduction in the inflationary pressure. These tariffs are aimed at making sure that the country is not importing more than it is actually exporting, to be able to maintain a good balance of payments (Kliesen, 2004).
The imposing of the tariffs implies that there is an increase in the prices of all the imported goods, which shows that the consumers have to pay a lot of money for the goods, or cut down their consumption on the goods. This would lead to consuming the goods, which are locally produced in the country from local firms like Apple Inc., since its products would be at a lower price, as compared to those of the importers. This increase in the prices of the commodities is what is responsible for the change of the behavior in the consumers’ buying behaviors.
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