Decreasing taxes can stimulate the economy by

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Business

Thomas Castaneda

19 July, 13:42

Decreasing taxes can stimulate the economy by

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Kristin Malone · Answer 1

Decreasing taxes can stimulate the economy by putting more money in the circulation or by boosting the spending. The tax cuts stimulate the economic growth only in the short-term.

Explanation:

Due to an decrease in tax the after tax income of an individual increases which is used by individuals to buy more product and services. Thus reduced tax rates leads to an increase in saving and investment, which leads to an increase in the productive capacity of the economy as a whole