Government Overview |
Detailed Economic History |
Germany is a democratic government, in which the people have the power. It is a mixed economy, which has some of the advantages of a pure market economy, which is where the buying and selling of people decides what goods and services are produced, how they are produced, and for whom they are produced, and the advantages of a command economy, where the government makes these decision.
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From 1922-1923, Germany was trying to pay its debts and repairs after World War I. They tried to pay it off by printing out papiermarks, which was the currency of Germany at the time, but this just led to hyperinflation, which is when prices skyrocket to dangerous levels. Inflation itself isn't bad, but the rate at which it happened in Germany was dangerous for the economy. Germany was able to recover by switching to a new currency. After World War II, Germany's economy actually grew because of the soldiers that returned to Germany and began working.
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Literacy Rate and Education ExpendituresGermany's literacy rate, or what percentage of people can read and write, is 99%. This is the same as the U.S's and shows that almost everyone in Germany can read. Germany's education expenditures, or how much the government spends on education, is 5.2% of its GDP, which is higher than the U.S.'s 5%. Germany made the choice of spending this much money on education because it thought at the margins, thinking that the marginal benefits, or the positives, weighed out the marginal costs, or negatives. If Germany were a pure market economy, the government wouldn't have any education expenditures because the choice of what resources go to education is with the market.
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Environmental IssuesSome of Germany's economic issues are coal emissions, air pollution, acid rain, Baltic Sea pollution, and hazardous waste disposal. Because of the fact that Germany is a mixed economy, it can set regulations on businesses to help the environment. These regulations may reduce how much money businesses can make and how much Germany can produce, but sometimes its worth it for the environment.
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Taxation Policy
In Germany, the tax rate increases as an individual's income increases. It starts off at 14% and goes all the way up to 45% for individuals. The standard corporate tax rate of Germany is 15%, but after stacking on the additional taxes that corporations have, it typically becomes about 30-33%. The taxes redistribute the wealth by providing people with benefits, such as health care, and giving them some economic security. If Germany were a pure market economy, then there would be no taxes because the government wouldn't be able to collect them. If it were a pure command economy, then the government would take everything that everyone owns and redistribute it.