Macroeconomics: Principles for a Changing World
4th Edition
ISBN: 9781464186929
Author: Eric Chiang
Publisher: Worth Publishers
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Chapter 10, Problem 1QP
To determine
Explain the role of government spending and tax cuts to boost the economy.
Expert Solution & Answer
Explanation of Solution
The government spending in an economy indicates the total consumption, transfer payments, and the investments of the government. The whole amount of the government spending is for the society. Therefore, it has a huge impact on economy. In case of tax cuts, a portion of the amount can be used for savings. This amount will not be used for the consumption of goods and services. Therefore, it will affect the impact of tax cuts on the economy. Hence, only the government spending can boost up the economy than tax cuts.
Economics Concept Introduction
Government spending: The government spending is the amount of money that is spent by the public sector in an economy for the purchase of goods and services.
Tax cut: A tax cut is a decrease in the rate of tax charged by the government.
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Chapter 10 Solutions
Macroeconomics: Principles for a Changing World
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