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Impact of fiscal policy on the US economy

Tax rates on both dividends and capital gains have been cut down to historical lows. Maximum tax rate on both dividends and capital gains is now set at 15%. Policy makers agreed to such a reduction hoping to see faster economic recovery, and further job growth. These policy makers would like to get your expert opinion on this issue.

1. Do you think lower taxes on dividends and capital gains can help hasten an economic recovery?

2. Further growth in the US production and job markets? Why?

Solution Preview

This is the issue of fiscal policy. Fiscal policy refers to nation's policy relating to the government spending, taxing, borrowing and debt management. The main objectives of the fiscal policy are:

Mobilization of resources
Acceleration of the economic growth
To minimize the inequalities of Income and Wealth.

The main objectives for which taxes are levied is to raise revenue by transferring resources from the public to government and the opposite applies when the government cut the taxes so that some resources are transferred from the government to public. It will depend on the tax system that how much it has impact on the economy. The characteristics of good tax system are:

Equity in distribution of tax burden
It ...

Solution Summary

This explains the impact of fiscal policy like tax cuts on the US economy, including how it affects dividends and capital gains. 472 words with reference.