Words: 375
If the sales of bananas are reduced significantly, it could spark changes in the entire global economic system and trade agreements. The purchase of grocery effect government is other ways as well. Sales tax is attached to sale or groceries. When consumers make fewer purchases, it decreases the amount of money going into the treasury. Another factor that affects the economy is massive layoffs. Organizations have a responsibility to their shareholders to remain profitable. In many cases, layoffs are necessary to keep the business operating.
Individuals are effected by massive layoffs because they have less money to spend. Individuals are then forced to choose between food, healthcare, and other necessities. When consumers have less money to spend, luxury items are no longer a priority. Studies show that when faced with economic woes, consumers spend less money on high ticket items such as clothes, electronics, and travel. For example, during the 2008 recession, twenty-seven percent of clothing manufacturing jobs was lost. Retail giants such as J Penny and Macy’s experienced a significant drop in the sale of clothing.
When individuals are laid off, they have less money to spend on luxury items. As a result, those businesses are also affected. Massive layoff effects the government as well. It causes less money to go into the treasury which results in higher interest rates and decreased market value. DECREASE TAXES One way to get the economy moving in a positive direction is by decreasing taxes. The collection of taxes is used to fund government projects. When taxes are decreased, it can have an immediate impact on the economy. A deduction in payroll taxes gives consumers more spending power.
When individuals have more spending money, they tend to spend more. In thriving economy industries such as travel, automotive, and retailers often see an increase in capital. Increase in profits means businesses have excess capital to expand and promote job growth. Decreased taxes also benefits businesses. Tax breaks on businesses allows them to lower prices on goods and service. If taxes are too low, the government is unable to fund projects such as rebuilding infrastructure, education, and social security. However, decreased taxes have been known to spark consumer spending.