5 strategies to reduce income inequality within a country
Peters asserts that progressive taxation is the most efficient way to reduce income inequalities in a society (72). In this approach, high-income earners pay more taxes than the low-income earners. This reduces income inequalities and ensures that the government spends income taxes on improving social welfare and benefits for the poor (Anand and Segal 60). Secondly, the government can reinforce labor laws to reduce income disparities. This is possible through amendment and implementation of the Minimum Wage Act in order to alleviate poverty among the poor. Peters indicates that increasing the number of labor unions also reduces income inequalities (34). In addition, investing in economic growth is an efficient way of reducing income disparities because it increases per capital income (Colander 87). Finally, providing incentives to small businesses by minimizing the entry requirements and access to low-interest loans are vital strategies of reducing income inequalities.
What is a countercyclical monetary policy and who is in charge of implementing it in the US?
A counter cyclical monetary policy is a strategy used by the federal government in America to counter business cycles. This policy is used when there are fluctuations in the economy. Particularly, it is important when there is an expansion or a contraction in the economy. It slows down when there is a rapid economic expansion and acts as a catalyst to stimulate growth. Counter cyclical monetary policy stems from Open Market Operations (OMO). Some of OMO tools that are used include government securities, reserve ratio and the discount rate (Colander 82).
Two different perspectives on the fiscal (government) deficit
The government takes an extra rent from the public by increasing taxes and budget deficits. This is in excess of what it requires to supply public goods to its citizens. Moreover, a conservative government may leave high deficits to limit the next’s liberal government public spending. The strategy is also to targets voters (public) in order to secure political mileage.
What is a procyclical fiscal policy and who is in charge of implementing it in the US?
A procyclical fiscal policy reflects a strategy where the federal government increases economic quantities. This in turn increases the natural cycle of businesses in the country. GDP is a good example that demonstrates the policy (Colander 90). Stock prices are also good indicators. This is because they will rise when an economy expands. The federal government can also choose to lower taxes in periods of high spending.
In Europe, which country has a Keynesian-oriented government and which country has a more neoliberal government?
Germany is an example of a Keynesian based government. During the global financial meltdown, Germany pumped billions of Euros in the economy and in their private banks (Peters 57). This was to stimulate the economy by increasing money supply to the citizens and reduce interest rates to commercial banks. Likewise, the government increased spending in infrastructure to stimulate the economy. Today, Germany is arguably the leading economy in Europe. Greece on the other hand, is a neoliberal oriented economy. This is because of its reliance on market forces to drive the economy (Peters 62). In Greece, economic policies hedged on market economy and private property. The benefits of these economic policies include a wider market for export goods and better-quality goods due to competition. Besides, it inculcates the belief that countries with high capital will give loans to less developed countries.
Why do the investors like and demand a low inflation rate?
Low inflation rate leads to high profits for investors. This is because the production costs do not rise in the short term hence; there are no changes in the contracts agreed initially. Secondly, there is a stable demand for exports and imports in periods of low inflation rates. In addition, there is a reduced speculation in the money market because exchange rates remain stable. Therefore, import and export prices will be stable leading to heightened consumer confidence. Investors can also make long-term plans because they know that their purchasing ability will not be eroded by fluctuations in prices.
What are the major differences between Marxists, Keynesians and Neoclassicals?
Neoclassical economists argue that governments should not interfere with economy. This allows individuals and businesses to dictate the outcome of the economy (Peters 73). Conversely, Keynesian theorists believe that governments should intervene by spending money in the economy to stimulate growth. Marxists believe that capitalism should be replaced by socialism. According to Peters, socialism involves distribution of goods and services according to one’s needs and ability (79).
Anand, Sudhir and Segal, Paul. “What Do We Know about Global Income inequality?” Journal of Economic Literature, 46.1 (2008): 57-94. Print.
Colander, David. Macroeconomics. Upper Saddle River, New Jersey; Pearson Publishers, 2001. Print.
Peters, Michael. Post Culturalism, Marxism and Neoliberalism: Between Theory and Practice. New York: McGraw Hill Publishers, 2001. Print.