Aggregate expenditure is the total amount of spending in the economy that determ
ID: 1108755 • Letter: A
Question
Aggregate expenditure is the total amount of spending in the economy that determines the level of the GDP. Components of aggregate expenditure are autonomous expenditure, planned private investments, government expenditure, and net exports. When autonomous expenditure increases or decreases, it has a multiplied effect on the GDP. Referring to the 10-year historical period that you chose for your final project, discuss an example of a change in autonomous spending. Research a government policy implemented during that time and discuss the multiplier effect it had on the economy.I choose the 1970's this is a discussion board
Explanation / Answer
Recession of 1970's, tax reforms which lead to the change in autonomous spending
1:Unemployment and inflation was high and GDP was decreasing from 4th quarter of 1973 till 1st quarter of 1975
2:Another issue was rise in the oil prices
3:Inorder to handle this difficult situation and improve the economy the government came with the policy tax cut of about $16 billion just to provide immediate stimulus to the economy which was in the bad shape.
4:Government recomended 12% rebate of 1974 taxes up to the maximum of $1000.
5:also $4 billion investment tax credit was proposed to encourage businessmen
6:Although congress rejected the proposed tax cut and implemented its own tax cut and its impact came in the 2nd quarter of 1975 however this reform lead to a huge budget deficit