One government strategy to provide for economic stability and encourage economic

Question

One government strategy to provide for economic stability and encourage economic growth is to provide tax reductions or tax incentives for individuals and businesses. An alternative approach is to increase government spending to accomplish these goals.
Which strategy do you believe would be more effective in the short term for accomplishing these goals? Which strategy do you believe would be more effective in the long term? Include in your answer a discussion of the benefits and drawbacks of both alternatives and include an analysis of the effects of the strategies on both GDP and unemployment. Justify your conclusions.

Explanation / Answer

Assuming that government spending does not hurt private business government spending will increase GDP and according to Keynsian economics will increase stability. However this will only work in the short run as government spending without increasing revenue will result in debt and a devalued dollar. Providing tax incentives and tax reductions will hurt GDP in the short run in that it will decrease revenue and help run up a deficit. However, in the long run this spurred investment has the potential to create wealth and increase the Consumption and Investment portions of GDP.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.