Chapter 12 - Assignment 1: Tax Cuts and Investment
Chapter 12 - Assignment 1: Tax Cuts and Investment
Read Benjamin Friedman's September 5, 1996 statement to the Democratic Forum on the Dole/GOP Economic Plan.
- Why might a tax cut (unaccompanied by a reduction in government spending) result in a
reduction in investment and economic growth?
- This statement suggests that a tax-cut might stimulate both consumption and investment
spending in the short run during a recession. Is this likely? Explain.
- In the long run, however, it is suggested that a tax cut unaccompanied by reductions
in government spending will reduce investment spending. Explain this argument.
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