How does the government policies affect the income?

Answer 1

Well, let's first look at income. To me that's goods and services. At the level of the individual that has to do with the amount of goods and services he or she can produce, and then get paid for in terms of the goods and services he personally wants. In terms of a business the same, it produces goods and services and receives the goods and services it needs. The income for a country, GDP, is meant to be all the goods and services produced by that country in one year, and is of course the sum of all the goods and services produced by all the individuals and businesses in that country. So if an individual were to have a personal goal 'To Encourage Production and Discourage Non-Production' he could make his own policies based on that: Not going to work...non-production. See, that's a no-brainer. Should I work at something that gives me twice as many goods and services as something else? Easy, no-brainer again. Now, is there such a goal in government that has to be considered with each law, Executive Order or policy that is made? No, I don't think so because most would obviously violate it. For example: paying someone not to work. Again, a no-brainer...if you have to the goal to encourage production and discourage non-production. A government should not pay someone 'not to work'. How about something like 'Income Tax?' The more a person produces, the more he is penalized. Quiz time. Does Income tax encourage production or discourage production? If you said 'Discourage' you would be right.

That is how government policies affect income. If the policy encourages production it increases income. If it discourages production is will decrease income.

I have expresses 'income' in terms in goods and services for an excellent reason. Let's take the actual definition the government uses for how much income the economy has in one year, called the Gross Domestic Product. If the government borrows 1 trillion USD and there are no goods and services involved in obtaining this 1 trillion USD then it does NOT represent production does it? But a government policy created this a definition of GDP that does allow it! Now in ones own thought processes, one might look at GDP and hear that it has increased only 1.4% (including 1 trillion USD plus of non-production). Assuming this amounts to 8% of GDP, how much did GDP actually increase? I say, 1.4% - 8% is - 6.6%. So you tell me, using this idea could any government official, or citizen now determine, 'How do government policies affect income?'