Asked by makayla porter on May 04, 2024
Verified
Why might government expenditures be more appropriate than tax cuts to counter recessions? Is there any evidence for this thinking?
Government Expenditures
The total amount of money spent by the government in a certain period, including spending on public services, social security benefits, and infrastructure projects.
- Comprehend the effects of monetary and fiscal policies on addressing recessions.
Verified Answer
RE
rafael espinalMay 09, 2024
Final Answer :
According to the traditional Keynesian model government expenditures have a larger impact on aggregate demand than tax cuts. Since tax cuts will be partly saved, the impact of a tax cut on aggregate demand is less than the impact of an increase in government expenditures. There is some evidence from computer simulations that government expenditures have a larger multiplier effect than tax cuts.
Learning Objectives
- Comprehend the effects of monetary and fiscal policies on addressing recessions.
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