Briefly Explain the Effects on Potential GDP of Cutting Each

question 72

Essay

Briefly explain the effects on potential GDP of cutting each of the following taxes:
a. Individual income tax
b. Corporate income tax
c. Taxes on dividends and capital gains

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Definitions:

Comparative Advantage

The skill of any individual, enterprise, or country in producing a certain good or service with a lesser opportunity cost than that of their competitors.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing an action.

Production Possibilities

The various combinations of goods and services that can be produced in an economy with a given set of resources and technology.

Absolute Advantage

A situation where a producer can produce more goods using the same amount of resources or less than other producers.