Question

Suppose you had a large unpaid balance on your credit card and were paying a high rate of interest. You then received a​ one-time tax rebate from the government and decided to pay down the balance on your credit card. If there were many others like you in the​ economy, would the tax cut be an effective​ stimulus?

Answer 1

The answer is NO.

Step-by-step explanation:

The answer is NO since the tax cut does not equate or rather would not be an effective stimulus due to the fact that debt reduction would not stimulate or increase consumption.

To properly understand the narrative of the question and the answer herein, let us define what effective stimulus is.

Effective stimulus or as preferably known as An economic stimulus is the utilization of funds or design of that helps agitate growth during downtime or recession in a country. The decision makers of a country mostly utilize the tactics of giving rebates and increasing government expenses to name a few.

Now relating it back to the question, since the intention of the rebate is to ease payment on tax does not equate to increase in consumption, the answer is a NO.