People related to fields other than economics really struggle to understand how economy actually works. Here i have tried to help them understand roughly how this thing works. It is only for people who know nothing about economy. People looking for expertise don't waste your time here.
Let me explain it through a practical example. Suppose a manufacturer manufactures a product and sell it at a profit of 100 bucks. Now from this profit he has to pay some percentage as tax ,say 5%, to the government. Now the government use this 5 bucks to improve the transportation ,either by linking the remote areas or improving the condition of the roads, Due to improvements in the transportation system the cost of transportation of raw material and that of finished goods gets reduced. Consequently the manufacturer will earn more profit ,say 110 bucks and he has to pay 5.50 bucks as tax to the government in this way economy grows.
Now next question is if it is so easy to improve economy why are many countries economically backward? Answer is ,"No it is not that simple. "There are many challenges that an economy has to face . Three are most basic challenges that it faces.
First challenge an economy face is tax theft. If manufacturer does not pay tax, improving transportation system is secondary thing, maintaining the existing condition itself will be difficult. and consequently profit will reduce and economy suffers.
Second challenge is corruption in the government bodies.
Third challenge is the government policy. Suppose the government decided to invest the tax money in some project which latter turned out to be non-productive or counter productive then it will fail to increase profit and economy will suffer. Here it should be understood that some of the investments of the government do not give tangible benefit in short periods but give intangible benefit in short time and sometimes returns tangible profit after long period of time too.
Many other challenges are there such as lack of funds, lack of technology ,over population , lack of resources etc. List is long. It can not be explained here. This article is posted only to give rough idea about economy.
I hope now you have now clarity about how taxes, corruption and the government policies impact the economy, at least on superficial level.
Let me explain it through a practical example. Suppose a manufacturer manufactures a product and sell it at a profit of 100 bucks. Now from this profit he has to pay some percentage as tax ,say 5%, to the government. Now the government use this 5 bucks to improve the transportation ,either by linking the remote areas or improving the condition of the roads, Due to improvements in the transportation system the cost of transportation of raw material and that of finished goods gets reduced. Consequently the manufacturer will earn more profit ,say 110 bucks and he has to pay 5.50 bucks as tax to the government in this way economy grows.
Now next question is if it is so easy to improve economy why are many countries economically backward? Answer is ,"No it is not that simple. "There are many challenges that an economy has to face . Three are most basic challenges that it faces.
First challenge an economy face is tax theft. If manufacturer does not pay tax, improving transportation system is secondary thing, maintaining the existing condition itself will be difficult. and consequently profit will reduce and economy suffers.
Second challenge is corruption in the government bodies.
Third challenge is the government policy. Suppose the government decided to invest the tax money in some project which latter turned out to be non-productive or counter productive then it will fail to increase profit and economy will suffer. Here it should be understood that some of the investments of the government do not give tangible benefit in short periods but give intangible benefit in short time and sometimes returns tangible profit after long period of time too.
Many other challenges are there such as lack of funds, lack of technology ,over population , lack of resources etc. List is long. It can not be explained here. This article is posted only to give rough idea about economy.
I hope now you have now clarity about how taxes, corruption and the government policies impact the economy, at least on superficial level.
Very nyc blog to understand economics brief but very knowledgeble.
ReplyDeleteWasif
Thanq.. glad to know it is of some help
DeleteThanq.. glad to know it is of some help
DeleteVery nyc blog to understand economics brief but very knowledgeble.
ReplyDeleteWasif
Thank you!!
ReplyDelete