Discuss the potential problem with a temporary tax decrease designed to increase aggregate demand if

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Discuss the potential problem with a temporary tax decrease designed to increase aggregate demand if people know that it is temporary? Answer A temporary tax decrease, or tax cut, is the definition of the reduction of the amount of tax that is charged by a government on some entity in the economy. The immediate effect of the tax cut being a reduction in the revenue generated by the government, and a reduced marginal sacrifice by the entity that has had its revenue decreased. Tax cuts are associated with various advantages to the economy, as well as the people. However, when people are aware of the tax cut, it can be associated with various inconveniences in the long run. First and foremost, it may have the effect of creating some degree of inflation, due to the fact that the people in the economy are aware of the fact that after some time, the normal tax rates will be applicable; which will have a negative impact on their incomes. Klemm, M. A. (2009). Furthermore, it

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