How can tax cuts help revive the economy? Essay

Submitted By garyee
Words: 904
Pages: 4
Open Document
How Can Tax Cuts Revive The Economy?

How can tax cuts help revive the economy?
Gary Smith
Content

Introduction…………………………………………………………………………...page2

Subtitle 1 ……………………………….………………….………………………… page2

Subtitle 2 ……………………………….………………….………………………… page3

Conclusion………………………………………………………………………....... page 3

References………………………………………………………………………....... page 4
How can tax cuts help revive the economy?

Introduction The purpose of this paper to provide reasons on how tax cuts can revive the economy in economical terms. This paper will examine past approach and the current state of the US economy in a recession with particular variables in place. Stimulating the economy when in a recession will increase productivity and consumer demands. These will the decrease the cyclical unemployment and increase spending by workers, businesses and the government.

As History Reminds Us
In the past tax cuts along with the increase in government spending has caused the government deficit and the national debt to grow. Tax cuts helps to promote business investment and expansion thru the possibly of encouraging job creation that results in increased consumer spending. During the Great Depression and WWII tax cuts were made and many bonds were sold, this was the governments’ way of stimulating the economy by way discretionary fiscal policy. We can see here that the government can control the taxes but not the tax revenues. During any recession, the government will participate in tax cuts for an economical stimulus. The expansionary fiscal policy involves government attempts to increase Aggregate demand. This involves increased government spending and /or lower taxes, representing an increase Aggregate Demand and lead to higher economic growth.
Both the discretionary fiscal policy and the expansionary fiscal policy can reflect a stimulus in the economy but are insufficient to help manage the government deficits. One reason that tax cuts may be effective is that it allows for consumer flexibility. Consumers can base spending on their disposable income. Many people may purchase more can use their tax cut for that purpose and for the people who want to save their tax cuts can put it in their savings or use it to buy up the new government bonds. The discretionary fiscal policy affects the personal attributes such as incentives to work, spend, save and investments.

Here and Now
Knowing that the economy is in a recession, there is a natural rate of unemployment that can be stimulated by tax cuts to cause the fiscal policy to increase the Aggregate demand on a short run basis. This will be demonstrated by increase of output and employment. In the long run the Aggregate demand will reflect a revival that is equal to increase in price levels and a decrease in output. Consequently, because of the long run of a recession it is suggested to run a budget deficit by increasing government expenditures in excess of current tax receipts. The increase in government expenditures should be sufficient to cause the aggregate demand curve to shift to the right, thereby restoring the economy to the natural level of real GDP. Any increase in aggregate expenditures has a multiplier effect on aggregate demand. The government only needs to increase its expenditures by a small amount to cause aggregate demand to increase by the amount necessary to achieve the natural level of real GDP. Many Keynesians urge that expansionary fiscal policy provides a quick way out of a recession and is to be preferred to waiting for wages and prices to adjust, which can take a long time. Changes in Aggregate demand are not caused by changes in the price level. However, they are caused by changes in the demand for any of the
Show More

Related Documents: How can tax cuts help revive the economy? Essay

Observation And Analysis Of The Class Videos

many government issues that are affecting the US economy. There are several discussions presented through social network and media. I would like to address two videos that were viewed. The first video is about Robert Reich in support of government spending. In the video, Reich is being interviewed about his viewpoints about budget cuts and how it could make job crisis worse. Main question and asked of him was President Obama’s emphasis on budget cuts to reach a deal on the debt ceiling. Reich response…

Words 1068 - Pages 5

THE UK ECONOMY FINAL Essay

THE UK ECONOMY Economics Coursework Nikhil Rawal 130014317 & Vivek Patel 130001482 2014 Introduction In this report we will be analyzing UK’s current macroeconomic position relative to the Global Financial Crisis (GFC) of 2008/09 and the measures implemented by the fiscal and monetary authorities to revive the economy. Currently the economy can be characterized by the following quote: ‘The recovery has gained momentum, output is growing at its fastest rate since 2007, jobs are being created…

Words 2180 - Pages 9

The Impact Of The Great Recession

Note to evaluator: The numbers next to each in-text citation are a reference tool, they represent where each source lands on the list in my annotated bibliography. The American economy is in dire straits from the collapse of the housing, banking, and automotive industries. The steep decline in economic activity during the late 2000s, is generally considered the largest downfall since the Great Depression. The term “Great Recession” applies to both the U.S. recession – officially lasting from December…

Words 5270 - Pages 22

Essay about SSRN Id2447576

growth, and to lay down the foundations which will return the economy towards a higher growth path. This paper begins with a consideration of the Framework for Strong, Sustainable, and Balanced Growth. Reforms after the Elections In my view, addressing these issues quickly in the post-election period would help to restore macro stability and revive productivity growth; Initiate policy changes to manage wage growth in line with productivity Cut the fiscal deficit Policy to Improve the business environment…

Words 3588 - Pages 15

Essay on 32802493

word: competitiveness.1 —Dilma Rousseff On August 15, 2012, Dilma Rousseff, the president of Brazil, unveiled a new stimulus plan, aimed at injecting up to R$133 billion (US$66 billion) into the economy by funding infrastructure improvements to roads and railroads over a 25-year period. The Brazilian economy had stagnated to a mere 2% growth per annum, despite GDP growth peaking at a remarkable 7.5% in 2010. This stagnation created concerns…

Words 14707 - Pages 59

Economics and Financial Markets Essays

Global Financial Crisis of 2008-09: Triggers, Trails, Travails, and Treatments † Ganti Subrahmanyam * The present world economy has, increasingly, been interconnected in terms of small units such as industries, regions and national economies as discontinuous systems. Changes in these systems have varied impact across the world economies. This paper tries to trace out various triggers, trails and travails of the present crisis, with a view to suggest solutions or treatments for the global financial…

Words 8163 - Pages 33

Stock Market and Company Essay

This helps the firms in distributing the cash how accumulates during the financial crisis Causes of Buyback Accumulation of Unused Cash. Tax Gain Market Perception Exit Option Monitoring Of Accounts And Legal Control To Show Good Financial Result To Increase The Stake Of Promoters. Siddhartha (2005), states that buying back of share repurchase is becoming more and more popular among companies because of its total flexibility with them. Moreover it is supported to be the most tax efficient…

Words 6367 - Pages 26

Mm: Pricing and Electric Car Essay

manufacturing and selling premium electric vehicles. Based in Sophia Antipolis Foundation and operating in Europe, North America and Asia, Trouvé is founded in 2002 by a group of sophia­antipolis foundation engineers who set out to prove that electric cars can be legendary. Trouvé, a public company trading on the Euronext stock exchange under the symbol V, is named after French electrical engineer and inventor Gustave Trouvé who invented the first electric powered automobile. The company first gained…

Words 4256 - Pages 18

Assignment On International Business

 CHRISTOPHER SELVARAJ ASSIGNMENT DETAILS Title or Topic Addressed  CATERPILLAR INC.   Due Date  28TH MAY 2015 Date Received  28TH MAY 2015 DECLARATION 1. I/We hold a photocopy or electronic copy of this assignment which can be produced if the original is lost/damaged; 2. To the best of my/our belief, no part of this assignment has been copied from any other student’s work or from any other source except where acknowledgement is made in the text; 3. No part of this assignment…

Words 6102 - Pages 25

Mergers and Takes Essay example

Takeover-this is when a business takes over another business. There are three types of takeovers; friendly, hostile and reverse. The Morrison takeover is considered as a friendly takeover because the Safeway was being offered bids by its rivals such as Asda, Tesco and Morrisons. Morrison’s seals Safeway takeover | Morrisons tabled its initial bid for Safeway in January 2003 | Britain's supermarket landscape has undergone sweeping change on Monday as Morrison’s completes its £3bn ($5.2bn)…

Words 5445 - Pages 22