Economics Assignment: GPI, Tax Cuts, and Trade Tariff Implications

This economics assignment provides solutions to questions regarding the Genuine Progress Indicator (GPI) as a measure of the standard of living in Fiji, the impact of corporate tax cuts in Australia using the Keynesian Cross diagram, and the effects of tariff imposition, particularly in the context of US trade policy. The GPI analysis discusses its adequacy and inadequacy in measuring economic well-being, considering both economic and non-economic factors. The Keynesian model illustrates how tax reductions can boost investment and productivity. The tariff analysis explains how tariffs protect domestic producers by reducing imports, referencing the principles of Free Trade Agreements. The assignment utilizes diagrams and economic principles to support its conclusions, offering a comprehensive overview of these key economic concepts. Desklib provides a platform to explore similar solved assignments and past papers.

Running head: ECONOMICS ASSIGNMENT
Economics assignment
Name of the student:
Name of the University:
Author note

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Table of Contents
Answer 1:...................................................................................................................................3
Answer 2:...................................................................................................................................4
Answer 3:...................................................................................................................................5
Reference:..................................................................................................................................7

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Answer 1:
Thesis statement: Genuine Progress Indicator or the GPI is acknowledged as one of the
matrices which is uses so as to measure the economic growth different economies.
Developed as the alternative to the Gross Domestic Product (GDP) it is better known
for the complete measurement of the economic growth; however, there is considerable
amount of debate regarding the fact how much it has achieved out of his target (Tolksdorf et
al., 2016). Through expanding the conventional framework of accounting as well as financial
aspect of the economic growth it includes various economic and non-economic contributors
related to the family and community so as to define and measure the development path of an
economy. It not only incorporates such factors which are directly effective to change the
economic diaspora of a state, rather it includes all the factor that has potential to change the
growth path and the magnitude to determine the future of an economy (Fox, 2017). GPI has
20 factors that guides the policymakers to depict the actual progress of an economy and as the
factors of determining the GPI it uses social factors as well as environmental factors too
(Lawn, 2016). These economic and non-economic factors of GPI calculation makes it stand
out from the crowd because earlier measurement fails to consider all the major factors within
its framework that restricted the performance of the same when it comes to the economic
welfare analysis. Though GPI is one of the developed measurement of the economic
development, there is considerable amount of debate regarding its performance because there
are many researchers who argue GPI is overburdened with the economic and non-economic
factors that restricts it to portray proper performance of the economic growth. normative
nature of the growth measurement method other than GPI are simple to calculate, whereas
overburdened factors of the GPI makes it one of the hardest on to define and determine
(Kubiszwwski & Costanza, 2015). On the other hand, one of the main drawback of the same
can be seen through its failure to define the development path of an economy with the

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business cycle theory that restricts its capability to predict the future growth and trend of the
same. Thus, as per the above discussion it can be said that if Fiji utilise the GPI index for the
short run, then it will be beneficial for the economy, however, in long run, GPI will fail to
determine the growth path of the state.
Answer 2:
Thesis statement: Deduction in tax is generally acknowledged as a boost to the capacity of
investment of a business entity.
In case of a deduction corporate tax introduced by the government will enhance the
disposable income of the business entities because the corporate houses will have to pay less
amount of money to the government as tax. It will enhance the investment capability of the
firms in Australia leading to rise in the productivity of the same through expansion of the
business (Suarez & Zidar, 2016). Now, if the government of Australia introduce the proposed
tax reduction to the firms within the given period, then it will all the respective corporate
houses to invest more in their business and enhance the productivity as well as output of the
same. Utilising the Keynesian model, this situation can be explained and Keynesian Cross
diagram can explain the same. Keynesian Cross diagram explain the relationship between the
aggregate supply and real GDP showcasing the different scenario sourced by the change in
the investment, tax and investment module change in an economy (Yagan, 2015). With the
help of the 450 line the diagram shows the scenario of rise in factors of production and in case
of change in the government expenditure, consumption, investment and total trade the
diagram represents a shift in the Aggregate expenditure (AE) curve (Nam, 2016). Through
the shift in the AE curve, the Keynesian cross diagram depicts the new equilibrium points in
the market and finds the optimum level of output and price for the market. Utilising the same
diagram given scenario of the Australian firms can also be explained and the same is given
below:

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Figure 1: Keynesian Cross
Source: (Created by Author)
As it can be seen from the above figure, if there is a reduction in the corporate taxes,
then it will downgrade the burden of tax on the corporate houses allowing the same to expand
for further growth in future. Firm’s investment portfolio will also change and over the years
the firm will expand (Noland et al., 2016). If the initial price is P0 and the AE0 represents the
initial aggregate demand, then Y0 amount of goods will be produced by the firm. On the
other hand, if there is rise in the in the investment through the reduction in tax then it will
shift the AE curve from AE0 to AE1 leading to rise in the price from P0 to P1 and the output
from Y0 to Y1. Thus, under the reduced corporate tax cut, there will be rise in the production
level and the price will also be enhanced leading producers to face better producer surplus
(Snape, 2018).
Answer 3:
Thesis statement: Imposition of tariff enhance the performance of the domestic producers
through reducing the import of goods and services.

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Figure 2: Consequence of tariff imposition
Source: (Created by Author)
Free Trade Agreement (FTA) was introduced in order to provide the signatory nations
a level playing ground so as to flourish international trade at both side. Imposition of import
tariff is against the basic rule of FTA, however, countries often imply the same in order to
safeguard the domestic producers. From the figure 2, it can be seen that, if there are two
nation A and B and the demand and supply of the market is D and S respectively, then
equilibrium will take place at P0 and E0 level of output. However, market is operation at P1,
where he demand of a said good is E1’ and the supply is E1. Thus, E1E1’ amount of good
will be imported from the foreign nation. If the government of country A imply an import tax,
then the price will rise to P2 and the import of goods and services will be E2E2’. Thus
through import tariff, there will be reduction in the import allowing the domestic producer to
produce more at higher price. For the US market same principal applies and the government
is trying to safeguard their domestic producers through imposition of tariff.

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Reference:
Fox, M. J. V. (2017). Designing for Economic Success: A 50-State Analysis of the Genuine
Progress Indicator.
Kubiszewski, I., & Costanza, R. (2015). Measuring Genuine Social Progress. In The
Sustainability Practitioner's Guide to Social Analysis and Assessment. Common
Ground Publishing.
Lawn, P. (2016). THE GENUINE PROGRESS INDICATOR. A Future Beyond Growth:
Towards a Steady State Economy, 158.
Nam, C. (2016). Impact of Corporate Tax Cuts on Corporate Investment.
Noland, M., Robinson, S., & Moran, T. (2016). Impact of Clinton’s and Trump’s Trade
Proposals. 16-6 Assessing Trade Agendas in the US Presidential Campaign, 17.
Snape, R. H. (2018). 9 the impact on exporters of import restrictions. Firms and Markets:
Essays in Honour of Basil Yamey, 8, 201.
Suárez Serrato, J. C., & Zidar, O. (2016). Who benefits from state corporate tax cuts? A local
labor markets approach with heterogeneous firms. American Economic Review,
106(9), 2582-2624.
Tolksdorf, A. M., Howard, T. L., & Ulferts, G. W. (2016). Strategic Perspectives on the
Genuine Progress Indicator and Gross Domestic Product. International Journal of
Strategic Decision Sciences (IJSDS), 7(4), 51-54.
Yagan, D. (2015). Capital tax reform and the real economy: The effects of the 2003 dividend
tax cut. American Economic Review, 105(12), 3531-63.