I'm New, and i need help .. Macroeconomics question

I have a question from an assignment that i dont know how to solve .. plllz help

Q. in an economy (X), the government decided to give tax-relief programs (that is very easy tax regulations and lower tax rates) to new (local & foreign) construction companies that locate and operate their premises inside the country.

a. what is the type of this macroeconomics policy? name and define this in macroeconomics terms?

b. explain why would the government apply such policies showing its effects (whether positive or negative) on the economic growth of the country?

Hope someone can help me ASAP :smile:

Reply 1

yoyo462001

16

a. Fiscal Policy
b. You should be able to do this now.

Reply 2

G_KEN

OP

ThaanQ SO much :biggrin:

could u be nicer and give me an answer for the second part (",)

Reply 3

kaying

2

a) yes, fiscal policy.
b) tax-relief programmes help to stimulate aggregate demand of goods and services in the economy? this boosts growth of the economy...
tax-relief programmes cost the government (they're losing out on income they could be receiving) so this could also mean negative growth? that is, if consumers do not spend in the economy and save the money instead.

tbh, i'm not pro at economics either but this is what is going through my head right now ><

Reply 4

pete.mcfc

1

Original post by G_KEN

I have a question from an assignment that i dont know how to solve .. plllz help

Q. in an economy (X), the government decided to give tax-relief programs (that is very easy tax regulations and lower tax rates) to new (local & foreign) construction companies that locate and operate their premises inside the country.

a. what is the type of this macroeconomics policy? name and define this in macroeconomics terms?

b. explain why would the government apply such policies showing its effects (whether positive or negative) on the economic growth of the country?

Hope someone can help me ASAP :smile:

1 = EXPANSIONARY fiscal policy

Reply 5

G_KEN

OP

thank you so much
i really need ideas, tell me anything on ur mind, i have to submit this on Saturday
and i appreciate all the help i can get

Reply 6

davidcy147

14

Original post by G_KEN

I have a question from an assignment that i dont know how to solve .. plllz help

Q. in an economy (X), the government decided to give tax-relief programs (that is very easy tax regulations and lower tax rates) to new (local & foreign) construction companies that locate and operate their premises inside the country.

a. what is the type of this macroeconomics policy? name and define this in macroeconomics terms?

b. explain why would the government apply such policies showing its effects (whether positive or negative) on the economic growth of the country?

Hope someone can help me ASAP :smile:

A) Fiscal policy.

B) Reducing tax/giving tax breaks to such firms, shifts the IS(investment-savings) curve such that interest rates decrease and the level of investment increases, due to the negative relationship between them. This increased investment leads to increased production and thus a increased outcome, which would be classed as a positive effect, in that, it would increase growth of the economy.