Final answer:
The significance of the Economic Recovery Tax Act (ERTA) of 1981 lies in its role in implementing significant tax rate reductions as a part of President Reagan's economic strategy. The Act aimed to stimulate economic growth through increased consumer and business spending. TEFRA, mentioned without detail, was important for reversing aspects of ERTA to address the budget deficit.
Step-by-step explanation:
The Economic Recovery Tax Act (ERTA) of 1981 was significant because it introduced major tax rate reductions. ERTA was part of President Reagan's efforts to stimulate economic growth through what became known as 'Reaganomics'. The focus of this act was on reducing taxes to increase consumer and business spending, which in turn was expected to lead to job creation and further economic expansion.
While the question also mentions TEFRA, no information on it was provided for reference. TEFRA stands for the Tax Equity and Fiscal Responsibility Act of 1982, which partly reversed the tax cuts enacted by ERTA by closing tax loopholes and increasing tax enforcement. The main goal was to address the growing budget deficit. Though TEFRA is significant for balancing the liberal tax reduction with fiscal responsibility, the details on ERTA have been emphasized based on the information provided.