CBO PAPERS: Description of Economic Models
Abstract
The U.S. economy is the largest and arguably the most complex in the world. Every day, millions of Americans are making economic decisions. Consumers are choosing among a vast array of goods and services and deciding how much income they want to save and where they want to invest it. At the same time, firms are making decisions about hiring workers, about investing in new plants, equipment, and technology, and about what and how much to produce. And at some point, everyone has to make important life decisions about work--deciding, for example, whether to take a job for the first time or leave the workforce to care for children, go to school, or retire. Government policies can influence all of those decisions. Higher marginal tax rates can reduce work effort, discourage saving, and slow the growth ofthe economy. Changes in entitlement programs for the elderly can influence people's decisions about retirement and saving for the future. Reducing the budget deficit can boost the U.S. capital stock, lower interest rates, and raise gross domestic product. Increased regulation and governmental mandates can reduce productivity. In addition, world events can affect the economy. An economic storm in Asia can roll across the Pacific. War can break out in the Middle East. World oil prices can shoot up. Stock markets can drop, and business and consumer confidence can collapse.
Document Details
- Document Type
- Technical Report
- Publication Date
- Nov 01, 1998
- Accession Number
- ADA358466
Entities
People
- Douglas S. Hamilton
Organizations
- Congressional Budget Office