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# Evaluate the likely impact of cutting tax rates as a policy to increase economic growth
- URL: https://www.a-level-economics-tutor.com/evaluate-the-likely-impact-of-cutting-tax-rates-as-a-policy-to-increase-economic-growth/
- Published: 2026-05-12T14:03:52.000Z
- Updated: 2026-05-12T14:03:52.000Z
- Author: Jaisul Naik
- Tags: Edexcel 25 Mark Question

In 2018, the United States Government cut the corporation tax rate (tax on company profits) from 35% to 21%. Income tax rates for US citizens were also reduced: for example, the top rate of income tax was cut from 39.6% to 37%. **Evaluate the likely impact of cutting tax rates as a policy to increase economic growth.** (June 2020)

**Plan**

- **Paragraph 1**
  - **Argument: one impact of a decrease in tax rates is an increase in economic growth through an increase in AD**
  - **Diagram: right shift in AD, multiplier effect**
  - **Evaluation: question the size of the multiplier effect, 1/(1-MPC)**
- **Paragraph 2**
  - **Argument: another impact of a decrease in tax rates is an increase in the trend rate of growth**
  - **Diagram: right shift in LRAS**
  - **Evaluation: question the opportunity cost and time lag**

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