Question

Explain which of the following policies you believe are likely to increase the rate of economic growth in the United States.

a. Congress passes an investment tax credit, which reduces a firms taxes if it installs new machinery and equipment.

b. Congress passes a law that allows taxpayers to reduce their income taxes by the amount of states sales taxes they pay.

c. Congress provides more funds for low-interest loans to college students.

Answer 1

b)Th policy of reducing income tax will help the economy to achieve growth in USA.

If there is lower income tax people have to low tax amount which make them to high disposable income in their hands. When people have high disposable income in their hands they will have more money to spend which will make them to consume more. When consumption in an economy increase there will be a in increase in aggregate demand thus leading to higher economic growth. When demand increase there will be more production of goods and services thus increasing employment rate in the economy. All these factors will help the economy to grow faster.