Sometimes, it could be so confusing differentiating between microeconomic and macroeconomic issues. There is actually no much ado as you only need to learn what their focus is. With this, you can know whether can easily determine microeconomic and macroeconomic issues.
The purpose of this article is to help you understand what Microeconomics and macroeconomics, as well as, problems, differences, similarities
Microeconomics studies economics from the vantage point of an individual or corporate level. On the other hand, macroeconomics studies the national economy on the aggregate. While both fields usually employ the same principles and formulas to address problems, microeconomics studies at a smaller scale while macroeconomics examines issues at a broader and larger scale.
Issues that has to do with household or company are the main focus of microeconomics This could be the supply or a demand for a product, the production capability of an individual or a company, or how the new tax reforms affect a business.
Macroeconomics will beam its searchlight on the economy as a whole. It could be issues such as the rate of unemployment, gross domestic product of a nation, and then, the impact of importation and exportation on the economy or taxation which will be our focus in this write-up.
1. It can alter the demands for goods and services
2. It can reduce motivation in working, savings and investment
3. It can raise or lower budget deficits.
It is very important to consider the macroeconomic effect of taxes as it affects the well being of people, though the effects do not at all times reflect on the measured economic output.
The major reason for tax is to generate sufficient revenue that can bring expenditures to equilibrium. When revenue is greater than expenditure, it is called a budget surplus; and when it is less than, it is referred to as a budget deficit.
Meanwhile, taxes are not only used to generate revenue, they are also classified as instruments of controls and regulations used by government to influence consumption, production and distribution patterns.
Tax can affect the ability to work, save and invest as it reduces the disposable income of the taxpayers. This can hinder them from acquiring necessities that can boost their efficiency at work. What affects efficiency automatically influence the ability to work. This, in turn effects savings and investment. This scenario relates only to a poor man.
In case of a rich person, the effect is insignificant on the efficiency and the ability to work.
Meanwhile, there are some harmful products such as cigarettes that require reduction in consumption rate for there to be an efficiency in working. In this case, we would not say all taxes have adverse effects on the ability to work.
Notwithstanding, taxes affect ability to save. Progressive rate of taxation has a great impact on savings knowing fully well that the Rich pay more taxes than the Poor. This will result to low level of investment which will eventually affect the economy growth of a country.
Demand is stimulated as consumer's spending power has increased. This creates more jobs as production will need to meet up with the demand of consumers which has increased, ceteris paribus.
Tax evasion is an illegal misrepresentation of financial statement by individual or a company or trusts. The extent is measured by what's called 'tax gap'. Tax gap is the difference between what ought to be reported and what's reported. A tax accountant or a tax preparer can be of help in ensuring that you properly represent the state of affairs of your finance.
Tax Avoidance, on the other hand, is the legal usage of tax laws in your country to reduce the amount of tax you pay. This is why you need to hire a tax account or find a tax preparer.
It is a punishable offense under the law to evade tax while tax avoidance is not an offense.
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