Sub: Economics

Topic: Micro Economics

Question: Pres. Bushs proposed tax policy in the case of a recessionary gap its effect on the federal government s
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budget.
What has Pres. Bush proposed for tax policy in the case of a recessionary gap? What is the effect of his policies on the federal government s budget? Please use the multiplier effect in your analysis

Solution:
Between 2001 and 2003, the Bush administration instituted a federal tax cut for all taxpayers. Among other changes, the lowest income tax rate was lowered from 15% to 10%, the 27% rate went to 25%, the 30% rate went to 28%, the 35% rate went to 33%, and the top marginal tax rate went from 39.6% to 35%.

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