🎛️ Simulation · Beginner
Across-the-Board Tax Cut
Congress cuts taxes significantly but does not cut spending.
The facts
- Taxes fall from 19% to 15% of GDP.
- Government spending stays at 22% of GDP.
- The Fed holds rates steady.
Your predictions
Playing it out…
Why?
Tax cuts leave households and businesses with more after-tax income, so they spend and invest more — aggregate demand rises and GDP growth picks up. With less revenue and the same spending, the deficit grows. The extra demand also adds a little inflation pressure. Economists debate how big the long-run supply-side boost is.