Fiscal Policy: Taxation
Table 1: Real GDP and Its Components Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Consumption 55 114.5 112.2 139 150.3 173.2 170.4 171
Government Expenditure 30 100 100 100 30 30 25 500
Investment 15 14.8 14.8 30.3 30.6 33.3 29.9 34
Exports 25 25.5 27.4 29.6 31.2 33.5 36.3 38
Imports 25 52.3 48.8 56.7 59.2 63.7 58.4 56.9
Nominal GDP 100 202.4 205.6 242.2 182.9 206.3 203.2 686.1
Real GDP 100 199.4 191.5 212 156.6 195.3 193.9 616.3
Table 2.1
Explain the intent of the taxation policy decisions you made of your seven-year term. What were the macroeconomic principles or models that influenced your decision making?
Identify the impact of your changes to the income and corporate tax rates. How were consumption and investment affected by your tax policy decisions? Explain these dynamics using specific macroeconomic principles from the course reading.
Compare and contrast the impact of your tax policy decisions with those of current or historical examples in the United States. What do these examples demonstrate about the validity of macroeconomic models? Be sure to cite your research appropriately.