Suppose the government decides to replace air force one, an ageing boeing 787 wi

Question

Suppose the government decides to replace air force one, an ageing boeing 787 with a new boeing 787 dreamliner. The price of the new plane (without the special improvements for the president's use) is 200 million. Not wanting to add that much to the reported total of government spending, Congress passes a law allowing the Boeing Corporation a 200 million one time tax credit in return for delivering the plane to the government. Explain whether the fiscal policy impact of this "tax expenditure" would differ from purchasing the plane by issuing a government check for 200 million.

Explanation / Answer

yes, the fiscal policy will be shown impacted with this transaction. the government will lose tax on purchasing worth of $200 million. it means the governement have a chance to receive tax on this purchase, but because of congress issues a special law it losses the tax on this transaction.

teh same will be impact on government spending pattern also. if the tax money were recieved, it can be used for spend for different purposes of the nation or in kind of development activity, or for welfare purpose also.

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