This is a graded discussion: 5 points possible due Jul 14 Ac Module 3 Policies a

Question

This is a graded discussion: 5 points possible due Jul 14 Ac Module 3 Policies and Economic Growth Michael Aubry 26 Explain which of the following policies you believe are likely to increase the rate of economic growth in the United States. a. Congress passes an investment tax credit, which reduces a firms taxes if it installs new machinery and equipment. b. Congress passes a law that allows taxpayers to reduce their income taxes by the amount of states sales taxes they pay. Congress provides more funds for low-interest loans to college students. Search entries or author Unread Subscribe Reply

Explanation / Answer

All policies will increase economic growth in US.

a) Investment tax credit encourages investment and increase in investment leads to increase in aggregate demand which results in higher real gdp and thus in higher economic growth.

b) decrease in income tax increases consumption spending which leads to increase in aggregate demand which results in higher real gdp and thus in higher economic growth.

c) Loans with lower interest rate encourages students to go for higher study. Higher education leads to increase in human capital which later increases productivity. Higher productivity leads to higher output and thus higher economic growth.

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