President-elect Obama's stimulus package looks like it will be a textbook example of expansionary fiscal policy. The blend of tax cuts for consumers and business as well as a healthy dose of government spending to build infrastructure combined with an aggressive monetary policy by the Federal Reserve should be just what the doctor ordered.
Remember, GDP = C + I + G + (X - M)
C = tax cuts for consumers should boost consumer spending
I = tax cuts for business should boost investments spending
G = infrastructure spending is an increase in "G"
(X - M) = the weak dollar should help net exports
Read this article from The Wall Street Journal for the full story on planned tax cuts.
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