Fiscal and Monetary Policy

How can tax cuts revive the economy? Content Introduction…………………………………………………………………………...page 2 levy Cuts in History……………………….………………….……………………….page 2 Effect of Having More Money…………………….………………….……………….page 2 affect Time Lag.…….………………………………………………………..............page 3 Conclusion……………………………………………………………………………..page 3 References………………………………………………………………………..........page 3 Introduction As an economys gross domestic product rises and f eithers through good times and bad, history has shown us how discretionary fiscal policy can process calm the economy. We volition look at how lowering taxes can help a f takegling economy. Tax Cuts in History John F. Kennedys budget, cut taxes in 1964 to help spur economic growth. chairman Kennedy had a demand side tax cut approach. A demand side tax cut puts more(prenominal) than gold in the custody of the consumers. Presidents Ronald Reagan, George H. W. Bush and his son George W. Bush all had a supply side approach to cutting taxes which leans more toward business investment being the key to long frontier growth (Greenberg, 2004).

Effect of Having More Money Whether it is supply side or demand side tax cuts, the goal of these reductions is to put more money in the hands of consumers or businesses to increase compound demand. With more money in the consumers hand they will spend a certain pct of this called the marginal appetite to consume. This money spent has a multiplying effect since a percentage is spent over and over, down to zero. The first psyche spends close .90 of every dollar that didnt go toward taxes. Then the person who received the .90 also spends 90% of it, and so on. If the tax cuts go more toward businesses, than they will spend more on expansion, This makes its port into more consumers hands, and this is called trickle-down economics. All of these Presidents had expansionary fiscal policies which led to growth in the economy. More money in our hands puts more money in the circular flow model. impaction Time... If you want to get a full essay, order it on our website: Orderessay

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