Sunday, August 7, 2011
How does the inequality have an impact on the macro-economy of the four components of GDP?
The classical economists believe that the rich can save more than the poor.The poor will use most of their income for consumption and mostly for foods.Inequality will turn the country to a low saving nation.It inclines to have more foreign debts than domestic ones. The tax revenue will be paid more to foreigners in a form of interest payment.An investment will yield less in a high inequality society. People will be reluctant to work for the rich. They don't love to give their whole heart to the workplace,but will demand more if they feel they are poorer and inferior. In a democratic society,the poor are many in number,they will choose the government. But the policy will be in conflicts with the rich.The tax-cut for the rich will be fought to death.The net export will decline. Since the investment will yield lees.People incline to import more.Why do they have to care of the domestic producers who are rich and the richest with greed?
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