Assignment:
In 2003, the Internal Revenue Service began to mail out refund checks because of a change in the tax law. Economic forecasters predicted that consumption and GDP would increase because of higher refunds on income taxes.
Pretend as if you are an economist and explain your thoughts on whether the tax cuts from the past few years have been successful in promoting economic growth or in preventing a deeper decline? Are there other changes to fiscal policy that you feel would have been more successful?
Objective: Identify current trends in macro and microeconomics.
Analyze the relationship between fiscal and monetary policy in an open economy.
Critically analyze the role of government in a market economy.
Use effective communication techniques.
Tax rebate or a tax refund is a tool of fiscal policy. A cut in tax rates is not the same thing as a tax cut. A decrease in the tax rates could lead to an increase in taxes collected if income rises enough to compensate for the lower tax rate. Fiscal policy is controlled by the President and the Congress at the federal level. The primary issue with fiscal policy is that expansionary fiscal policy where crowding out could occur.