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The Effect of Fiscal Policy and Tax Reduction to GDP

The company is actively encouraging Washington citizens to approve a transportation tax plan that would (according to its supporters) improve transportation in the Seattle area, and the company has not been above suggesting that it might be forced to move its operations if the transportation environment does not improve. Here, clearly, Boeing recognizes that its efforts benefit the local economy, and that local fiscal policy can have a direct effect on its ability to compete. Godley and McCarthy suggest that there is a similar effect on the national level, and that companies such as Boeing are in a position to lobby the federal government to modify fiscal policy in order that overall GDP can be increased.

Godley, W., & McCarthy, G. (1998, January-February). Fiscal policy will matter. Challenge (41), pp. 38-54.

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Source: Challenge, Jan-Feb 1998 v41 n1 p38(17).

Title: Fiscal policy will matter.

Author: Wynne Godley and George McCarthy

Abstract: A novel model of the economy is presented which is based on the

assumption that an increase in government expenditure results in corresponding

increases in gross domestic product (GDP) while decreases in tax rates

indirectly increase GDP. The model supports the theory that economic growth

depends on an expansionary fiscal policy. Thus, it is critical to expand

fiscal policy and compare it progressively with projections made by the

Economic forecasting - Research


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