When enacting fiscal policy

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When enacting fiscal policy, the form such policies take is often at issue - should we enact fiscal policy by lowering taxes or increasing spending? There are many points of view on either side of the spectrum.

- How do tax cuts affect GDP?

- Do tax cuts have the same impact on GDP as an equal increase in spending? Why or why not?

- Expansionary fiscal policy involves deficit spending. What is crowding out? Describe the harmful impact of the crowding-out effect on the economy.

Reference no: EM131099436

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