Improve long term GDP (2009 AM)

CFA Level III
#1

Jusitiy if below can help improve long term trend of GDP.

  • A broad increase in taxes to fund programs that provide support for low-income families;

I’m thinking tax may interrupt the economy but low-income families may be able to contribute more longer term. Could someone please advise? Thanks.

#2

Yeah, I found this shock to be least clear, of all the shocks I’ve seen in the past exams, in terms of impact on long-run GDP growth. When in doubt, I have used this generalization of the CFA Institue’s stand on economic policy (take it for what it’s worth):

Higher Taxes = bad for growth

More Gov’t intervention = bad for growth

Freer markets = good for growth