Eric Larsen wrote:
If you have spiraling high inflation then you need to cool down your economy. Reducing research investment will help. Raising income taxes on all 3 groups will help as well as raising corporate taxes. That will help curb demand and employment. I also like to raise property tax and the activities tax to curb demand. Also don't forget to reduce your expenditures on social spending. Reduce your efficiency expenditures and raise your domestic markups to cool down demand. I had inflation up to 9.5% and did these things and got down to 4.8% before easing off and allowing inflation to rise slowly again. I only added about .2% to my unemployment so the rebound worked well.
Inflation is all about demand for products. Reduce your demand and your inflation will reduce as well.
You're wrong, it's not all about demand, it's all about GDP/c base figures wich can be taken from logfiles for every turn. Increase the rate at wich ur gdp/c grows and u can instantly link that too more inflation and less unemployment. Fiddling with the taxes only slightly change the GDP/c base number and inflation behavior. Fiddling with taxes will just change the way money flows go in your country, afterall ur controlling the state aswell as the market, so if u increase taxes, the market gets less money, and that cuts u back aswell. So the knive cuts two sides in this game.
Decreasing taxes will indeed increase consumer demand, but only till a point. I noticed that u can get away with a tax % of about 35.5 without ANY drop in consumer demand for goods. So a tax rate of 0% or 35.5% equals the same amount of demand for goods. Naturally setting a 35.5 actually GAINS u 35.5% expendible income (wich u redirect into ur economy making it even bigger), also funny is that the higher ur taxes go the more negative it effects ur economy in the long run. Higher taxes naturally curb the growth factor of ur gdp/c (and can even drive it into the negatives) but higher taxes don't neccesarely mean more income, afterall the knive cuts on two sides. I found that taxes over 60% or utterly useless. What u gain in taxes is lost in consumer demand for goods. You're best bet is to find that perfect sweet spot between consumer demand and goverment taxing (note: the sweetspot actually changes with time and is not consistent)
wow I drifted ofcourse
anyways, I advice anyone to let their economy grow on average about $5 a day (for wealthy nations) or about $2-3 for the poor nations. Anything above that will cause rampant inflation. It seems an economic expansion of about 4.5% is do-able without large inflation. Real world economic expansion is often about 10%. The game can't do 10% because inflation is normally integrated into economic expansion. If the US inflation is 5% and the real economic growth is 5% then the economic expansion = 10% (5% + 5%) the ''nominal gdp'' will have grown with 10% while the economic growth maybe only 5%.
Practictly speaking, everything costs 5% more then it did last year, but u earn 10% more aswell so u can really buy 5% more goods...hence the 5% economic growth
Inflation isn't really integrated into SR2010 because nobody knows how to define or to really explain how inflation works. So BG team just took the easiest form they could find. Philips-curve inflation, old and out-dated but not an unproven theory.