question archive There are many perspectives on how to stimulate the economy; consider these two: a) "Trickle-down" which argues that the benefits of policies (tax cuts, etc
There are many perspectives on how to stimulate the economy; consider these two: a) "Trickle-down" which argues that the benefits of policies (tax cuts, etc
Subject:EconomicsPrice:2.88 Bought3
There are many perspectives on how to stimulate the economy; consider these two:
a) "Trickle-down" which argues that the benefits of policies (tax cuts, etc.) which positively impact higher-income households and businesses, eventually will trickle down to those in lower income brackets and stimulate the economy.
b) "Trickle-up" which argues that policies (tax cuts, etc.) which positively impact middle and lower-income households will increase aggregate demand because these income classes typically spend more of their income, and will eventually stimulate the economy and benefit all households.
Which do you find to be more effective? Why?
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The effectiveness of either policy will depend on the conditions present in the economy.
If there is a situation where business confidence is low, it would be better to go with a trickle-down approach. This would mean that the business confidence goes up, businesses start employing more people, and the lower-income groups benefit.
On the other hand, if we have a situation where the consumer sentiments are low so that they are not looking to spend, a trickle-up approach could be a more effective and faster way out of the situation.
