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Economics
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Do you believe that tax cuts or increased government spending can provide a better fiscal stimulus? Explain yourself fully.

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Divya Singh
Divya SinghLv10
28 Sep 2019
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Related questions

In the run up to the 2008 US presidential election, both major contenders, John McCain and Barack Obama, promised that if they were elected they would push for significant new discretionary fiscal policy in 2009. Obama's proposals as a candidate was for legislation which would be roughly 2/3 new government spending and 1/3 tax cuts or stimulus checks (This is roughly the distribution of the 2009 economic stimulus that Obama signed into law in 2009 shortly after he took office). McCain's proposal was for roughly 3/4 tax cuts or stimulus checks and 1/4 new government spending.

In your initial discussion post, do you think discretionary fiscal policy wold be more effective if its primarily tax cuts/payments to households, increases in government spending, or a equal balance of both? If you were president in 2009 what type of fiscal policy (if any) would you have pushed for?

Assume that the U.S. government initiates a stimulus package to help the sluggish U.S. economy. Further assume that, among other things, this package includes $200 billion in government spending as well as 5% tax cuts for consumers. Explain the logic behind this move and evaluate the policy.

Bush lowered taxes in the 2001 recession and his tax cuts continue. Obama has increased government spending through his stimulus packages. What effect should these expansionary policies have on the AD and AS curves? How should they shift? What should be the impact on GDP, and unemployment as a result of these shifts?

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