Taxation and growth Essay Example | Topics and Well Written Essays - 2000 words

Taxation and growth - Essay Example widespread drop in spending or decrease in demand, and the parsimoniousness faces a lot of pretentiousness that is the general summation in the prices of all goods in the economy. This affects the direct of growth in such an economy since most of the income is used on manipulation and very little is spent on growth and development. Therefore, the level of growth declines signifi gittly. This can be reversed during frugal recovery by use of fiscal policy. This is where the regime uses taxation or fiscal policy measures to be able to control the economy (Barro & Gordon, 1984).U.K experienced an economic recession between 1998 and 2012. This was stimulated by the worldwide inflation that was affecting the economy in call of prices of goods. The government of U.K adopted the use of tax policies to be able to gain economic recovery and growth.increase demand is a tool for short-term recovery. This can be done through reduction of consumption tax es. In return, people will spend more than hence there will be an increase in demand, which will stimulate business in the economy. Hence, economic recovery in the short running play will be achieved.Increasing the supply in the economy would stimulate long-term economic recovery. This can be done through reducing the taxes for inputs and raw materials that will make them cheaper to stimulate supply. This will thereof lead to increased supply in the economy since suppliers can be able to buy more goods to supply their goods to the market, which leads to economic growth through trade.Low-income earners harbour very little disposable income. If the government would cast down their taxes, the little income that would be saved would stimulate demand and hence help the economy recover from recession. This is because low-income earners have little to save and to invest meaning that most of their income is used to buy basic commodities. As a result, demand increases and the economy gr ows significantly.Consumption is a daily activity for every person.