Detroits Pension

Essay by yghalebCollege, UndergraduateA-, October 2014

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The city of Detroit and its citizens are in a difficult position. Many hard decisions are going to be made. One such decision is Detroiter's pension budget. With all the reductions to their pension, employees will be forced to shift their demand curve left. Which is to say, they will need to cut back on goods and services they do not need. For example, going to Red Wings games every weekend, may have to change into once every month. The employees will have less money to spend with so their demand for extracurricular wants will diminish.

Similar to their demand curve, employees' marginal propensity to consume will decrease. Marginal propensity to consume is quickly defined as how much would one spend with an extra dollar to their income. In this situation employees are losing dollars so obviously their margin for spending is less.

During financially difficult times people tend to save their money instead of spending it.

However the marginal propensity to save will decrease. Marginal propensity to save is the antithesis of the marginal propensity to consume. For example, with an extra dollar an individual can spend 60 cents and save 40 cents. The opposite is also true. The margin for employees to save will lower because they will have a lower income in total due to reduced pensions.

Detroit's bankruptcy could actually hurt the United States' total GDP. Detroit is not what it once was. The Motor City doesn't produce as many goods as it did a few decades ago. However, even its diminished production goes into the nations GDP. Any factories or facilities that once produced goods, that are no longer able to do so, due to bankruptcy, have affected the GDP in a negative way.

I would not change the current property tax or maybe...