How Tax Cuts Help Revive the Economy - Assignment Example

The paper "How Tax Cuts Help Revive the Economy" is an excellent example of an essay on macro and microeconomics. The favorable effects of tax reduction have regularly sought reflection through the two-way adjustments brought by the employment of fiscal policy to which varied responses from the taxpayers in the opposite side of the stream are expected to follow to determine how its overall contribution to economic growth would behave. In general, enabling tax cuts diminishes the real income of the government while augmenting disposable income for the people paying tax at lowered rates (Heakal).

Out of the several propositions that emerge from this basic idea, it turns out that enduring macroeconomic impact made by tax cuts remains unpredictable though the economy may attempt at an ideal scheme in which government spending is curtailed whereas taxpayers yield to rising expenditures on the country’s goods and services. In this picture, one may deduce by experience that such design leads to a more positive stimulation of the economy since people as consumers are found to be wiser and more familiar on budgeting with specific commodities according to free-market advocates.

On occasion that the government decides to maintain its expenditure, at the event of decreased tax thereby incurring debts, as taxpayers further utilize the additional income toward consumption, economic stimuli evolved from the point of implementation over a long period can be foreseen to return appreciable tax revenues that would take care of future debt payment (Economic). In times when recession prevails, tax cuts may get the economy back to normal flow if people are either maximizing their consumption ability or placing their tax cuts on investment as purchasing bonds from the government (Tax Cuts).

Depending on how the government responds with its spending adjustments through fiscal policy, the levels of economic revival would favor the aspect at which the government seriously gets involved. Igniting economic cycles from stagnant to dynamic may be attainable to a higher extent as the government encourages means that operate around tax multiplier, making one variable a function of the other in a flexible setting. This would further tell how a certain desired aggregate output may be achieved as working on tax multiplier facilitates the government to stay focused at re-assessing the potentials of modifying the fiscal policy to acquire one that best coincides with the application of the reduced tax.