Discuss whether a reduction in taxation will always increase a country’s economic growth rate.

Answers should discuss role of different forms of taxation e.g., income tax, corporation tax, VAT.

Better answers will evaluate the potential limitations, and cases in which a reducation may or may not be effective. 

e.g., bringing in concepts such as Ricardian equivalence (consumers are forward-looking, so a reduction is taxation is saved to buffer against future tax increases)

e.g., substitution effects (the tax reduction makes people work less)

e.g., specific types / targeted tax (tax cuts for the poor/rich)

AL
Answered by Andrew L. Economics tutor

4188 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Describe one effect of an increase in the rate of interest on the economy?


An economy has 3 leakages from the circular flow. The marginal propensity to save = 0.17, the marginal propensity to import = 0.23 and the marginal tax rate = 0.4. The government rises spending by £300 million, what is the final change in national income?


How does an increase in interest rates affect real GDP?


What are the effects on UK businesses after an increase in fuel prices?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning