Qualification > Commerce

economics help needed

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ahaseebmirza:

--- Quote from: Lovee on May 29, 2010, 08:58:59 pm ---I disagree. This only applies on one condition. "When import rised comparitively to exports", that would start off the chain of events.

If this doesnt happen, fixed exchange rate systems actually invites imported inflation:




--- End quote ---

I totally Agree with u but his question did not mentioned inflation so thought would be confusing but thanks for the reply...These discussions clear the concepts..:D

Naina107:
Can someone help me with what is the J curve effect actually?

Coco:
Thanks...
Also could anyone please let me know the diffrence between a fiscal drag and a fiscal boost?

cashem'up:

--- Quote from: Coco on May 30, 2010, 09:04:14 am ---Thanks...
Also could anyone please let me know the diffrence between a fiscal drag and a fiscal boost?

--- End quote ---
Fiscal drag refers to the process where tax thresholds are either not adjusted for inflation, or fail to
keep pace with earnings growth, causing in either case an automatic rise in tax revenues.

Example of nominal fiscal drag
Suppose a person earns $20,000 per year and is liable to 20% tax on earnings above a threshold of
$5,000 per year. Then they pay (20000-5000)*0.2 = $3000 in tax, or 15% of income. Now suppose
that due to inflation, their wage goes up by 5%, but the government only increases the tax threshold
by 2%. They must now pay (21000-5100)*0.2 = $3180 or 15.14%. The proportion of income as tax
has increased - this is fiscal drag.

Fiscal Boost - inflation will reduce the real burden of specific taxes
(I.e. taxes levied per unit of a commodity
irrespective of its price) such as excise duty.

this is up in my notes..... ;D ;D ;D
hope it helped ;D ;D ;D

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