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Government Monetary and Fiscal Policy: Tax Cuts and Economic Activit

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In 2003, the Internal Revenue Service began to mail out refund checks because of a change in the tax law. Economic forecasters predicted that consumption and GDP would increase because of higher refunds on income taxes.

If you were an economist please explain your thoughts on whether the tax cuts from the past few years, have been successful in promoting economic growth or in preventing a deeper decline? Are there other changes to fiscal policy that you feel would have been more successful?

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Solution Summary

This solution explains the concept and application of fiscal policy in 478 words.

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In 2003, the Internal Revenue Service began to mail out refund checks because of a change in the tax law. EconomicThis 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:
- ...

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