Question

Would you support the idea of renovating current airport infrastructure throughout the United States? What about decreasing federal taxes in the U..S.? Evaluate these two statements using economic rationale.

Answer 1

Answer - I would support the renovation of the airports rather than the decrease in tax rates. The renovation of airports will create the job opportunities in US which is the need of an hour. The rise in employment will boost the income and consumption levels and thus boost the growth of economy along with the improvement in infrastucture. On the other hand , the decrease in taxes is not guaranteed to increase the economic growth , it will not increase the employment is substitution effect is stronger. Also the value of tax multiplier is less. Hence this option is not preferred