Business cycle and economic development

Video activity: Do tax cuts stimulate the economy?

Answer the following questions:

Match the words and their definitions:

	people who have high incomes and the potential to be wealthy in the future.
	a range of incomes subject to a certain income tax rate
	a tax on the profits of a corporation
	a wide range of measures which governments use to manage their economy.
	changes to the tax code that reduce the amount of tax people have to pay
	the amount that divides the income distribution into two equal groups, half having income above that amount, and half having income below
	A comprehensive statement of the assets, liabilities of government
	the revenues collected from taxes on income and profits, taxes imposed on goods and services, payroll taxes, taxes on the ownership and transfer of property
	the percentage of an income or an amount of money that has to be paid as tax.
	a reduction in tax rates assuming that corporations and entrepreneurs would reinvest tax savings to generate more employment opportunities

Now watch a Ted-Ed video on Whether tax cuts stimulate the economy (until 3:35) and answer the questions below:

How was the US economy doing when Ronald Reagan became a president?
Economy was struggling, high unemployment rates; all-time high inflation in 1979
What economic policyintroduced by Reagan’s administration was mentioned?
Tax cuts for large corporations and high-income earners
What was the reasoning behind the trickle-down theory?
The money saved in tax cuts would trickle down to everyone else
How did the US economy do in the 1980s and 1990s?
Economic growth; growing median income and number of new jobs
How is the tax revenue related to high taxes?
If taxes are too high, people would be less willing to work, which would decrease the tax revenue
How might the government profit from a lower tax rate?
The government might gain more tax money, which could be used to improve citizens’’ lives
Which tax was higher in 1981 – the income tax or the corporate tax? And which was higher in 2021?
In 1981 – corporate tax was higher; in 2021 – income tax was higher
What was the outcome of the tax cuts in Kansas in 2012/13?
Government’s balance sheet became negative
What did the study by the London School of Economics find out about cutting tax?
Cutting taxes increased the wealth of the top 1% of people, but had little effect on the whole economy
What would the rich have to do to stimulate the economy?
They would have to spend the saved money, e.g., put it in local businesses