How can tax cuts help revive the economy Explain Essay

How can tax cuts help revive the economy Explain - Essay Example Pertaining to the reduction of the gap and to take the economy out of the crisis, the package of fiscal stimulus was observed as an effective way-out for the economy. The planning of the government within the economy was not held effective enough in mitigating the problem of economic crisis. According to the plan of the US government, the amount of public spending consisted in the policy towards enhancing multiplier effect through discretionary fiscal policy was merely about 480 billion Dollars. This amount has a multiplier of about 1.5 which means government spending of each Dollar would increase the GDP of the economy by 1.5 Dollar (Shostak, 2009). With regard to the less reliance on the natural forces in the economy, successful management of the government is essential in line with the inducement of individuals’ spending within the economy. Tax cuts act as an economic booster during the times of recession when generally people decrease their level of spending in order to fi ght with the economic crisis. Tax cuts can be termed as an important aspect of the expansionary fiscal policy of the government and it helps to a greater extent in strengthening the aggregate demand within the economy and thus eliminate the slump resulted due to the economic crisis.