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lectur3-page48 - managers may elect to slow production down...

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Let’s take a look at a rather unpopular idea among citizens, raising taxes. Look at the graphic above. Now flip back to the previous slide and look at it, then flip back to this slide. Is there much of a difference with respect to the final outcome for the economy? Increasing taxes, ceteris paribus, will result in less disposable income and probably less consumption. Inventory levels will start to increase, and managers will be called upon to take some action to return their systems to equilibrium. If the economy had very low unemployment and production was occurring near capacity,
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Unformatted text preview: managers may elect to slow production down by shortening the work week or possibly laying employees off. If the economy had relatively high unemployment and production was occurring at levels significantly below full capacity, raising taxes may push the economy into a recession. Managers may opt to decrease prices in response to the increase in taxes under these circumstances. I would like you to e-mail me with a discussion on what the possible affects on the deficit or surplus may be. E-mail me at [email protected] 48...
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