hey, im doing this assignment and i was just wondering if this fact is true, if tax cuts occur, and people will have a increase in income, would it cause inflation due to the fact that more people are spending. If so , please explain
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Yeah essentially, as long as the tax cuts are across all tax brackets. Tax cuts in higher tax brackets won't cause as a greater rise in aggregate demand per person than tax cuts in a lower tax bracket, since those on lower incomes tend to spend a greater proportion of their income than do high income earners.Riviet said:The tax cuts means consumers have a little more disposable income, so theoretically there will be upward pressures on inflation, caused by the increase in aggregate demand for goods and services.
Don't know what this has to do with distribution of income.red802 said:hey, im doing this assignment and i was just wondering if this fact is true, if tax cuts occur, and people will have a increase in income, would it cause inflation due to the fact that more people are spending. If so , please explain