Friday, May 11, 2007

Chapter 6: Determination of National Income
"Taxes claiming nearly half of your income, survey says"
680News - Monday, April 16, 2007
By: Allison Barnes


Government policy and taxes are draining the average Canadian family income more than food, clothing and housing combined. According to the Fraser Institute, it found that Canadians spend nearly 45% of what you earn on taxes. So if an average family makes $63,000 then they pay over $28,000 in taxes. Personal income taxes account for only 32% of the total taxes paid by the average Canadian family in 2006. Compared to before Canadians are now paying more in direct taxations, such as income taxes, sales taxes, employment insurance and Canada Pension Plan contributions. There are also other so-called hidden taxes, such as import duties, gas and taxes, and excise taxes on tobacco and alcohol.

With people realizing how much they pay in taxes, the tendency to save up money instead of spending it becomes even greater. When this happens money is taken out of the flow of money, which means not enough money is sent to the business sector. This may result in cut backs in production and labour. The cut back themselves would mean that there are less money going to back to the households in the form of wages causing an endless cycle. Government policy and taxes affect business spending greatly. For example excise taxes on products will defiantly affect consumer demand. Not only can changes in taxes affect consumers, but also potential investor both local and foreign. In order to find how the changes in taxes affect GDP, the tax multiplier can be used. Using the formula you can figure out the affects on GDP from changes in taxes.

Change in GDP= -[changes in taxes * (MPC/1-MPC)]

Taxes are complicated to deal with. If you bring it up people get worried and don’t spend as much. If you lower taxes people feel like they should take advantage of this opportunity and increase in their spending. An extreme case of this would be people traveling all the way to places where provincial taxes are eliminated in order to go on a shopping spree. The taxes imposed by the government greatly affect both the people and business in different ways, but they are all linked together in a cycle.

Wednesday, April 04, 2007

Chapter 5: Economic Indicators
"Unemployment down to 6.1% in December"
CBC news, published: Friday, January 5, 2007


Summary

The national unemployment rate of Canada reached back down to a 30-year low with a 6.1 percent in January. The increase from December’s employment increase includes 37,000 full-time jobs and 25,000 part–time jobs. The overall for 2006, employment grew by 345,000 jobs, or just over 2 percent. In Alberta, employment growth in December after months of re-hot expansion, but the province still led the country with the lowest provincial jobless rate of 3.4 percent. Albwet’a tight about market continue to put pressure on wages, which rose 5.9 percent from a year ago to $21.60, the highest growth rate in the country.

Reflection and Relationship

Having a low unemployment rate is always good and especially one that reaches a 30-year low. With more people working it would help stimulate the economy and making use of the labour force. Even though the economy is operating at full capacity there is what is known as the natural rate of unemployment. There will always be the people who aren't working for different reasons like they can't find the job they want or they are just plain lazy. To be more precise, there will always be those who are unemployed because of seasonal, frictional, and structural reasons. With this many people employed and having a reasonable income, it will affect Canada’s economic statistics. The gross domestic product/GDP will increase due to the increase in to all the final goods and services that are produced. With people willing to spend because then the exchange of goods and services will continue to grow. The eonomy will grow from this and prices may rise from the sudden increase in demand.

Although low unemployment is a good thing it may eventually cause things to become more difficult. In Alberta’s situation the average income has risen to $21.60 and with this increase in income, people would spend more. This would create a large demand for supplies and also decreasing the supplies. It may eventually lead to the point where the aggregated demand for the goods and services to exceed the supply, which may cause the prices to go up. This would be known as the demand-pull inflation. Also as the standard of living goes up people or countries may be discouraged from investing in Canada. If companies have to pay high wages for Canadian workers, they may turn to other places that are willing to work for lower wages. If this holds true then it may cause a problem in the future because everyone knows that nothing good last forever.

Thursday, February 22, 2007

Chapter 4: Government in Canada

“BC Budget cuts Income Taxes and Pledges over 4 years for Housing”

Canadian Press, Published: Tuesday, February 20, 2007

Summary

The new budget set by the provincial government of British Columbia is to cut income tax and those at lower income levels will be getting more help. The new provincial budget focuses on housing and finances. The highlights of the new budgets include anyone earning up to $108 000 to get a 10 percent personal income tax cut, the province will spend $2 billion on housing strategy over four years, another 900 full-time shelter beds, and an increase of $50 for income assistance and welfare. The budget also allows first-time homeowners to not pay the property transfer tax if they buy a house with a value up to $375 000. This is only a brief summary of the new provincial budget, which also includes other things such as assistance for low-income seniors, rental assistance programs, reduction of sale taxes, and many more.

Reflection and Relationship

Provinces receive about 70 percent of their revenues from taxes alone. This is also true in British Columbia. Now that the government is planning to cut sale for people who buy energy efficient products such as hybrid cars, energy efficient boilers, and furnaces they lose a large portion of their revenue. Not only are they giving tax breaks they also plan to increase welfare and shelter rates for people on income assistance. This makes you wonder how they are going to keep these promises when they are losing a portion of their revenue due to the tax cuts they are making. In order to keep these promises the government may depend on personal income taxes that are collected. In the new budget only people that make it up to $108 000 per year can get a 10 percent income tax cut. Since Canada runs on a progressive approach in income taxes, people with a higher yearly income pays a higher rate in taxes. So that means only a small fraction of people will be able to get that tax cut, since there isn’t a large amount of people meeting that requirement.

Another thing is that the cuts in sales taxes and tax exemptions for energy efficient products don’t guarantee people will buy them. This may create the initiative for people to buy energy efficient products, but there are no guarantees. People may continue to buy inefficient energy products therefore not affecting the collections of sales tax. Also the cancellation of the property transfer tax for first-time homebuyers, who buy a home that is valued up to $375 00 is a joke. There are hardly any homes with that kind of price around anymore. With house prices still rising this new regulation will have hardly any effects.

One reason for the government to make such a move may be a result from how well the economy in British Columbia is doing. The royalties collected by the government may be able to cover the cost of these new assistance programs. For any reasons having tax cuts are always a good thing even if it is only good for the short run.

Sunday, January 21, 2007

Chapter 3: Media Article

"Landlords not keen on government bill", CBC news Dec 21, 2001

This article is about the introduction of Bill-26 that was passed by the provincial government of Quebec. Landlords are upset about the new bill and are hoping that the bill could be withdrawed. The new bill limits the questions that a prospective landlord may ask a prospective tenant before leasing a place out. This new bill therefore limits the amount of information that a landlord can gather before leasing out their homes, and therefore affecting his or her judgment. The Association of Apartment Owners of Montreal says the government is responsible for the current housing crisis. They say the reason the crisis exists is because of rent control.

Relationships to Chapter 3 - Market Imperfections (Information)

Usually when the government gets involved the source of information is made more available to both the supplier and the consumer. But in this case it has a more of negative affect on the suppliers, which are the landlords, than the consumers. With the introduction of the new bill, the landlords are now limited on questions they can ask and therefore affecting their decision. This makes it harder for the landlords to prevent drug operations from happening on their own property. At the same time new laws were passed or being passed that states it is the landlords responsibility for the place you are leasing out isn't being used for drug operations. Penalties such as fines will be sent to those who are unable to meet these requirements. With this bill it makes it even harder for the landlords meet these laws. If a landlord does rent out a place to people and later finds out its used for drug operations, the land lord must go through the rental board and prove that it is a used for drug operations before breaking the lease. This process is a very long and slow process that would decrease effeminacy. By introducing this new bill landlords are more hesitant about leasing their place out to strangers. Instead the landlord would be looking for potential tenant through reference rather than through advertisement. This at the same time affects consumers too since there will be less information provided by the suppliers or the landlords. The consumers may be unaware of the price differences or if the place for is actually out there. This may just affect the entire market by creating what seems to be a shortage from the lack of information sent out. In my opinion I don’t agree with Bill-26. The restriction of information will only cause more problems and making it harder for people to protect their own property that they are leasing. If they continue to do this it is hard for these people to lease their homes out to people. They would just rent it to people that have connections to them in some way. If the bill were to be withdrawn, then people would be more willing to spread the information to a larger population and increasing the amount of shared information.

Wednesday, November 08, 2006

Chapter 2 Media Article

"House prices still rising", Calgary Sun November 3, 2006


This articles states that even though new listings are flooding the residential realty market the average combined residential sale price is still reaching a record of $374 067. Even though the sales activity is easing across the city (Calgary). There was a 4,257 new listing in October, marking a 51% increase from the same month of 2005 and a 11% jump from September. Home sales have dropped 2.7% to 2,122 from September to October. The overall average combined sale price, which includes houses, condos, and mobile homes, rose 1.1% from the previous month and 46.9% from October 2005. Single-family dwelling carried an average price of $413,712 in October, up from $284 206 a year ago. A typical condo cost $283,888, an increase from $187,661 during the same month of 2005. Also Canada Mortgage and Housing Corp. released an outlook, which states that sales of existing homes across Alberta will see a record for the seventh consecutive year in 2006 before dropping slightly the following year.

Relationship to Chapter 2 - Supply and Demand

There are several factors that affect supply. The higher the price that a supplier can receive for their product the more willing they are to produce for the market. Obviously the supplier feels that it is more worthwhile to supply something that is worth a lot more than something that is worth less. As the market for housing continue to rise more and more people are going into that industry, meaning that even more houses are being built. Increases in housing available doesnt necessarily mean that more houses are being built, but also people selling their own house to make a profit. The price is not the only thing that causes an increase in supplies. Technological change can influence the supply as well. As more and more high tech equipment is introduced into the workplace production will be faster. The demand for housing is still high, and even though there are new houses being built the supply is still relatively fixed. Since the production is a slow process the supply can not keep up with the high demand, so therefore prices continue to rise. Unless the demand goes down the price will continue to rise. With the price rising at such a quick rate, it makes you think when it will ever stop. Eventually there has to be a limit to how much a price of a house can rise up to, but the most important question is when will it happen. Even though a house is a necessity, there is a limit to how much someone is willing to pay. If prices continue to rise like this I don't think people in my generation will be able to afford any houses.

Chapter 1 Media Article

"Growing wheat scarcity may send prices skyrocketing", Business Report October 31, 2006

This article informs us of the growing scarcity of wheat in the world. The growing price of wheat will be the highest in the next six months, and threatening to spur inflation in China and India. One of the main reasons for the shortages in wheat is due to the droughts in Australia, Ukraine, and the United States. If the situation continues on, prices may jump 47 percent more to $7.50 (R56) a bushel on Chicago futures markets. Egypt, the world's biggest wheat importer, bought 180 000 tons for $34.4 million, triple what it had initially sought. A state-run grain trading company in India said it wants to buy an extra 35 000 tons after already buying 6.5 million tons this year. The world inventory would fall 43 percent by June to 119.3 million tons, the lowest since 1982. Higher wheat prices will cause economic hardship for some countries, meaning that bread and cereal prices will go up.


Relationship to chapter 1 - Resource (land), Scarcity

Since wheat is the world's most planted crop and also one of the most widely used crop, it is no surprise that the shortage will have tremendous effects. Droughts have devastating effect on the crop, but the problem with land also has a large impact as well. There is only so much land to be used for farming, and with the expansion of human population into areas with fertile soil, which contributes to the growing scarcity of wheat. Not only does limited amount of land affect the scarcity of wheat put also the ever growing population of the world. The production of wheat cannot keep up with the growing demand of wheat from the world population. As time passes, the world population may just be too overwhelming and causing the price of wheat to rise even more. The rise in wheat prices isn't necessarily a bad thing for everyone; farmers are just some people that profit from times like these. As long as they continue to produce the same amount as they do now, they will earn a higher profit with the same amount of crops. This may give farmers the motivation to produce more crops during these times to earn more profit, eventually stabilizing the supply of wheat again. What will happen one day when there isn't enough supplies of wheat for everyone? There isn't really any substitute for wheat and many people depend on wheat as part of their diet. Unless we develop new growing techniques to produce more crops on less amount of land or to manage the supply of wheat more efficiently, we will always have this problem on our hands.