First, let’s look at why the government might lower tax rates to increase aggregate demand and fuel economic growth determined by fiscal policies spending and tax rates. The policies are a response to recessions that increases government spending towards infrastructure, education and unemployment benefits. If society has lower taxes, they will have more money to invest and spend which makes room for a higher demand. Monetary policy is passed by central banks through using the funds in an economy. The money supply influences interest rates and inflation, both of which are major determinants of employment, cost of debt and consumption levels (Hall, 2018).

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