Utkarsh asked in Social ScienceEconomics · 1 month ago

How rapid GDP growth can reduce fiscal deficit?

5 Answers

  • Oiy
    Lv 6
    3 weeks ago

    It mainly due to an increase in trade and tax revenues. And the growth will bring along the inflaion. To stop or prevent it,the FEd has to raise the fund rate, and the govermnen has to reduce fiscal policy.

  • kswck2
    Lv 7
    4 weeks ago

    It can also backfire. Uncontrolled growth can also be met with too much expansion, thus leaving a gap in having too many products and not enough consumers to buy them, which creates a glut. 

  • Sandy
    Lv 7
    1 month ago

    just like it does when you get a fatter paycheck, you pay off some of your credit cards. well responsible people do anyway. ; )

  • 1 month ago

    the idea is that the taxed amount, as a (relatively) fixed proportion of all production, will increase at about the same rate as total production (GDP).  Tax revenues will increase when GDP increases.  It can only be used to fix the deficit if outlays are not linked to GDP as well, though.  Deficit=money in (tax revenue) - outlays (spending).  As long as GDP change causes revenue to increase more than spending, deficit must fall.

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  • Anonymous
    1 month ago

    It can’t, if the people pocketing all of the money get tax cut after tax cut after tax cut. 

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