ECON 101 Lecture Notes - Lecture 15: Tax Rate, Aggregate Supply, Capital Formation
Document Summary
They encourage individuals to substitute less desired tax deductible goods for more desired non deductible goods: changes in marginal tax rates, particularly high marginal rates, may exert an impact on aggregate supply because marginal tax rates influence the relative attractiveness of productive activity compared to leisure an tax avoidance, supply side policies are designed to influence long run growth (not short run fluctuations, impact of supply side effects. Spending increases: some argue that increases in government spending will expand gdp by more than tax reductions, because 100% of an increase in government purchases will be pumped into the economy, whereas part of the tax reduction will be saved or spent abroad, however, the issue is more complex than this simple multiplier analysis implies, there are several reasons why a permanent tax cute will promote recovery more effectively than either a temporary tax cute or a spending increase.
