Question

If the tax bill cuts taxes for the middle class, how will this affect the real economy and the forex market? Explain with the help of a graph.

Answer 1

If the tax bills are cut on the products in the middle class, then the price of the products will come down with which the quantity of products bought increases with which the Forex market books with the increase in sales on the whole. However the real economy also tend to decrease up to a certain point due to the loss in revenue in the form of taxes but later, due to the higher consumption of products, the economy then tend to increase as well. the difference can be viewed in the graph below.