The Affects Of Ecstacy Essay Sample

The Affects Of Ecstacy Essay Sample

… A proposed tax cut affects budget deficit in that it reduces national savings, resulting to an inward shift in IS curve, which marks a trade deficit. A tax cut resulting to budget deficit happens because a decrease in tax raises disposable income (Y-T), which in turn stimulates people to consume (consumption). The people’s increased propensity to consume lowers the national savings as a result. Since the trade balance (NX=net exports) is equal to a relationship between savings and investment (NX= S-I), a reduction in national savings (lower S-I) will yield to a decrease in NX …

… consumption or planned expenditure by MPC x ∆T. MPC x ∆T is the multiplier effect on income, illustrated by an outward (rightward) shift in the AD curve.
A proposed tax cut is favorable to individual consumers because it stimulates consumption as a result of increased income. However, the individual effects of a tax cut is only favorable to individual consumers, but also puts the economy of a nation in a unfavorable position in the national and international market, because an increase in income and consumption will result to a decrease in investment, thereby increasing the interest rates in …

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