There are instances where the economy of a nation suffers from the various influences that make it sluggish. The government is then taxed to revive the economy to ensure it realizes its maximum potential. The economy of any nation is important as it determines the standard of living that the country's citizens will have. Therefore, the government can revive the economy of its country by enabling deficit spending and cutting taxes paid by its citizens.
The government of any country will be inclined to stimulate the country's economy to ensure its citizens have a better living standard. One of the ways to achieve this is to make use of deficit spending. This occurs when the government takes advantage of its spending power and takes on a loan to stimulate the economy ( Hussain & Haque, 2017 ). Although the government will be spending more than its revenue, the excess cash will be injected into the economy, thus stimulating it to realize idealized outcomes. Another approach is to cut the taxes levied on its citizens (Gale & Samwick, 2014). The government collects taxes from its citizens to balance their budgets. However, when the economy is slow, cutting down on the taxes, levied is a smart move. Citizens will be motivated to indulge in more businesses if they know they will be taxed less, leading to economic growth for the country.
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Governments experiencing tough economic times should reduce taxes and use deficit spending to curb the potential problems of slow economic growth. Citizens will be more likely to participate in business activities if they see the taxes levied on them have been reduced. Deficit spending allows the government to overspend intentionally, thus stimulating the economy. Since governments are tasked with ensuring economic growth in their countries, these two approaches ensure that there is money circulating in the country to stimulate the slow economy.
References
Gale, W. G., & Samwick, A. A. (2014). Effects of income tax changes on economic growth. Economic Studies. https://www.brookings.edu/wp-content/uploads/2016/06/09_effects_income_tax_changes_economic_growth_gale_samwick.pdf
Hussain, M. E., & Haque, M. (2017). Fiscal deficit and its impact on economic growth: Evidence from Bangladesh. Economies , 5 (4), 37. https://www.mdpi.com/2227-7099/5/4/37/pdf
