Political Science

Inflation is the rate of increase of prices and at the same time the rate of decrease of peoples purchasing power. Usually, inflation rate should just be kept at 2-3. The government who ineffectively managed the rate of inflation negatively affects its national economy by making the people uncertain how much money should they need to earn, spend and save in able to get an acceptable way of living to each of them. This gave financial woes to lending institutions as they dont know if the people could still be able to pay their monthly mortgages. Money would not be able to reach the market to buy goods since everyone are trying to save as much as they can.

Rents refer to the amounts paid for the use of inelastic resources such as land and other non-consumable properties. Government who dont control the amount of rents causes the economy to not be able to safeguard investments made on a leased resource. This thus increase the risk that a start-up business making use of a leased resource would fail because of unexpected future rent rates. Stability issues would be the priority of the people that might lead them to not anymore venture into a business or to re schedule their plan up until they have the money to buy a resource.

The higher someone is earning, the higher is his progressive tax while the lower someone is earning, the higher is his regressive tax. If the government would not implement this two kinds of taxation by making regressive tax as progressive tax, there would be a problem with adding up of additional cost due to sales tax for example of a car with two buyers, one from the rich and one from the poor. if the tax would depends on their monthly income, the car would cost more for the rich than for the poor. If the government would rather decide to just implement regressive taxes more, then the rich could get more too powerful than the poor.

Pay-Go system is the use of available funds rather than borrowed to finance the government projects. If the Government would heavily rely on borrowed money, the budget deficit for public funding would get higher and higher per year.