Reducing the severity of economic downturns

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When George Bush became president in 2001, the economy was falling into recession because of 9/11. President George Bush responded by cutting tax rates. When Barack Obama became president in 2009, the economy was in the worst recession in many decades. He responded with a stimulus package, that included substantial increase in government spending. The contrast between the polices raised a Macroeconomics question: Which tool of fiscal policy -Government expenditure(spending) or taxes is better for reducing the severity of economic downturns? Which one has a larger impact on GDP? Why? Explain.

Reference no: EM132417093

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