What’s bad about lowering taxes under the fiscal policy and lowering interest rates under monetary policy?
January 1, 2009
kiyo-kyo asked:
What’s the effect on future inflation?
What’s the effect on future inflation?
President Bush has decided to pass out tax rebates and lower the income taxes while Ben Bernanke are lowering hte interest rates on the bank borrowings.
January 4th, 2009 at 8:52 am
The main problem is that the national debt is being run up to unmanageable levels, which will itself generate future inflation. In a real sense, all of the Bush ‘tax cuts’ should be thought of not as cuts at all, but transfers of taxes from current taxpayers to future taxpayers – and actually tax increases,because future taxpayers will be hit with the bills both for the high spending of this administration and the interest on its borrowing.
In fact, inflation has run at levels unprecedented since the 1970s for the past few years, although most of this has been nearly invisible to American consumers, coming in the form of rapid falls in the value of the dollar against the Euro and other major currencies.
This is a problem with the general fiscal irresponsibility of the present administration. But in the current situation, with a very severe recession threatening, the fiscal stimulus through short term rebates is likely a good idea.
January 5th, 2009 at 1:55 am
mmmm!! though question! let me do some graphics…..
by lowering taxes demand increases, supply increases as well, therefore The Price level Increses.
I’m not sure about the monetary policy but ultimetly it leads to price leven increasing.
since the price goes up, inflation occurs… so if other factos don’t affect consumer expending, these policies will increase the inflation rate.
Gosh I can harldy remember!!!!!
I need to go back to school!!
good luckk!