Some politicians and economists argue that tax cuts are beneficial for the government budget balance and...

Some politicians and economists argue that tax cuts are beneficial for the government budget balance and are also beneficial for the economy in the short run and the long run. Explain their arguments and evaluate them briefly.

Expert Solution

Some politicians and economists argue that tax cuts are beneficial for the government budget balance.

They argue so because as the tax cuts are introduced, aggregate demand in the economy increases which leads to increase in in employment, output and income in the Economy. As the incomes in the economy increase, at the decreased tax rate, there is now more revenue because the tax base has increased due to increase in income. So in this case decrease in tax rate leads to an increase in government revenue through the increase in income in the economy. Hence, tax cuts are beneficial for the government budget balance.

Moreover, tax cuts are beneficial for the economy in the short run because in the event of the recession, these tax cuts puts money in the pocket of people, leading to an increase in aggregate demand and output in the economy and thus bringing the economy out of recession. Hence, tax cuts are beneficial for the economy in the short run.

Since, the classical, the Keynesian and major school of thoughts consider the Long run Aggregate Supply Curve to be Vertical, tax cuts do not have any effect in the long run on the economy in general and the real variables in particular like output and employment. Hence, it cannot be said that tax cuts are also beneficial for the economy in the long run.

Rahul Sunny answered 1 year ago

Some economists and politicians argue that raising the minimum wage does a disservice to those it...

Some economists and politicians argue that raising the minimum wage does a disservice to those it tries to help. They claim that businesses will resist a higher minimum wage by laying off workers, moving their businesses offshore, or just closing down. Some sympathetic to the plight of the poor claim that society should deal with poverty in a different way, such as through private charities. Most opponents of a minimum wage claim that workers are free to seek better paying...

Some economists argue that the government intervention makes the economic outcome even worse. Some argue that...

Some economists argue that the government intervention makes the economic outcome even worse. Some argue that there are important economic roles of the government. What is your opinion? Does the government do good or bad? Briefly discuss.

Some economists, such as Paul Krugman, argue for government to take a more Keynesian approach to...

Some economists, such as Paul Krugman, argue for government to take a more Keynesian approach to promoting economic growth—that government borrowing can be economically healthy, in developing infrastructure for future needs or to spend its way out of a recession. More conservative economists argue that a country’s economic growth over the long term is better obtained through a tighter monetary policy and a more aggressive approach to balancing the budget. Which is more important for a healthy economy, a balanced...

Some economists and policymakers argue in favor of replacing the current income tax in the USA...

Some economists and policymakers argue in favor of replacing the current income tax in the USA with consumption tax. What are your opinions on the issue? How do think such change impacts your income and expenditure pattern? Which tax method do you prefer- Income tax or consumption tax? Why? What are the pros and cons of the two tax methods?

Some economists argue that the government should avoid active use of monetary and fiscal policy to...

Some economists argue that the government should avoid active use of monetary and fiscal policy to try to stabilize the economy. What are the key points of each side of the issue? Explain what opinion you support and why.

A. Some economists argue strongly that monopoly (or monopoly power) is a huge problem for the...

A. Some economists argue strongly that monopoly (or monopoly power) is a huge problem for the economy, and that the government needs to take vigorous action to eliminate or control monopoly (through the use of anti-trust laws or regulation). Other economists seem to believe that monopoly really isn’t a problem that we need to worry about that much. (20) 1. Why do some economists worry so much about monopoly –in what ways do they believe that monopoly is inferior to...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to the economy and nations that run large trade surpluses with the US are benefiting from unfair trade practices and agreements. These parties support increasing tariffs on imports, elimination, or re-writing of trade agreements. Respond to the following in a minimum of 175 words: Discuss what credible economists say about the effects that tariffs, changing trade agreements, and/or manipulating exchange rates will have on the...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to the economy and nations that run large trade surpluses with the US are benefiting from unfair trade practices and agreements. These parties support increasing tariffs on imports, elimination, or re-writing of trade agreements. Respond to the following in a minimum of 175 words: Discuss what credible economists say about the effects that tariffs, changing trade agreements, and/or manipulating exchange rates will have on the...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to the economy and nations that run large trade surpluses with the US are benefiting from unfair trade practices and agreements. These parties support increasing tariffs on imports, elimination, or re-writing of trade agreements. Respond to the following in a minimum of 275 words: Discuss what credible economists say about the effects that tariffs, changing trade agreements, and/or manipulating exchange rates will have on the...

To eliminate deficit spending and reduce public debt, some politicians and economists have proposed a Constitutional...

To eliminate deficit spending and reduce public debt, some politicians and economists have proposed a Constitutional amendment requiring a balanced federal budget. In your initial post to this discussion, respond to each of the following prompts based on what you’ve learned in this module about deficit and debt. What present and future benefits might result from an amendment requiring that each year's budget be balanced? What limitations or costs might result from such an amendment? Describe alternative legislation that might...

Question

Some politicians and economists argue that tax cuts are beneficial for the government budget balance and...

Solutions

Expert Solution

Related Solutions

Some economists and politicians argue that raising the minimum wage does a disservice to those it...

Some economists argue that the government intervention makes the economic outcome even worse. Some argue that...

Some economists, such as Paul Krugman, argue for government to take a more Keynesian approach to...

Some economists and policymakers argue in favor of replacing the current income tax in the USA...

Some economists argue that the government should avoid active use of monetary and fiscal policy to...

A. Some economists argue strongly that monopoly (or monopoly power) is a huge problem for the...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to...

Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to...

To eliminate deficit spending and reduce public debt, some politicians and economists have proposed a Constitutional...