Question

After reading Mr. Bartlett's article "It’s the Aggregate Demand, Stupid", state whether you agree with his points and what you think would have been good fiscal policy back in 2011 to stimulate (grow) the economy. Feel free to be as specific as you desire - discuss what specific government programs you would fund and/or on which groups (companies, not-for-profit organizations, rich people, poor people, middle-class people, etc.) you would reduce taxes to increase Aggregate Demand, if you feel that would be appropriate fiscal policy. If you disagree about increasing Aggregate Demand, please state your reasons very clearly. 150-200 words

Answer 1

The appropriate fiscal policy to improve the aggregate demand is to reduce the tax slab for the middle income population. Reducing the tax rate would increase the disposable income in the hands of the population thus increasing the aggregate demand. As middle class population constitute the largest population size and influences the market demand to a very high extent, so it is appropriate to cut down the tax rate on middle class population.

Moreover, government should also fund the start ups and any innovative business proposal by the individual. The start ups need to be supported by required funds in order to boost the new entrepreneurial set up. This would in turn provide employment opportunities to many people, improving their standard of living and thus in turn increase the aggregate demand as a whole.