India cuts business taxes

//India cuts business taxes

India cuts business taxes

BBC: India delivers surprise corporate tax cuts to boost economy

Article published: Sep 20, 2019

IB Economics syllabus: Macroeconomics (expansionary fiscal policy, supply-side policy)

A great article if you’d like to write about expansionary fiscal policy for your macroeconomic commentary. The Indian government has announced huge corporate (business) tax cuts in order to boost investment (and hence aggregate demand as investment is component of it). Don’t forget that in economics, investment is defined as firms buying capital goods. Therefore, as firms have more disposable income to spend on capital, they will also likely increase production levels and this can help boost economic growth, which recently has been declining, currently “sitting at a six-year low.”

Furthermore, you can also state that this policy will also boost the productive capacity of the economy (aggregate supply) and hence can be regarded as a supply-side policy. More specifically, it can be regarded as a market-based incentive-related supply-side policy as business tax cuts can be used to increase the incentive to invest and thus lead to the increased quantity and or quality of factors of production. This leads to economic growth in the long-run and shifts the LRAS curve to the right.

Source of image: Unsplash.com

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By | 2019-10-09T09:55:28+00:00 October 9th, 2019|Macro|Comments Off on India cuts business taxes

About the Author:

My name is Daniel Szekely and I work as an IB Economics tutor, examiner and teacher. Having earned an MA degree in Economics at the University of Aberdeen, I started my career as a financial analyst at Morgan Stanley, one of the largest investment banks of the world. Yet, despite the promising career prospects of the banking industry, I decided to make a larger social impact by becoming a teacher. Currently, I teach IB Economics at SEK Budapest International School and have been an examiner for over 6 years. I started EconDaddy as a simple blog to share great articles with my students and others taking IB Economics around the world to use for their commentaries. Being a practicing IB Economics tutor, I have first hand insight into the most common mistakes of students, so the EconDaddy blog now also provides exam and commentary writing tips.

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