Understanding the Expansionary Fiscal Policy (Research Paper Sample)

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The Tax Cuts and Jobs Act (TCJA)
Article Overview
The article titled “The US Senate passed the massive Republican tax bill in the middle of the night -- here's what's in it” from Business Insider by Bob Bryan on December 3rd, 2017 talks about the changes to be made in personal and businesses taxes in the United States. The Senate has endorsed the Tax Cuts and Jobs Act (TCJA) that is going to cause significant alterations in the Federal tax code. The changes in tax law will affect both individuals and businesses CITATION Bob17 \l 1033 (Bryan). For instance, on personal tax brackets, the Act seeks to sustain the current brackets but reduce the tax rates and also alter the income levels of respective tax brackets.
Furthermore, the business will benefit from the changes brought by the Tax Cuts and Jobs Act. For example, the corporate tax will be reduced to 20 percent in 2019 from the previous rate of 35 percent. This legislation will also permit the companies to deduct business expenses entirely CITATION Bob17 \l 1033 (Bryan). The purpose of these changes by Trump’s administration is to enhance the economic growth of the United States and increase employment.
Economic Analysis
Expansionary Fiscal Policy
The fiscal policy comprises of variations in taxes as well as government expenditure to control economic growth. The fiscal plan can either be expansionary or contractionary CITATION Oli13 \p 84 \l 1033 (Blanchard and Johnson 84). The expansionary fiscal policy incorporates a reduction in taxes and an expansion in government expenditure and causes a rise in the aggregate demand. Conversely, contractionary fiscal policy entails a hike in taxation and a reduction in government expenditure CITATION RGl13 \p 75 \l 1033 (Hubbard and O'Brien 75). Since the Tax Cuts and Jobs Act involve a cut in taxes, it is an expansionary monetary policy.
Impact on Tax Cuts and Jobs Act