Why an investment tax credit may cause an increase

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Reference no: EM131302812

Writing in the New York Times, Tyler Cowen of George Mason University argued that an investment tax credit, which allows firms to reduce their taxes by some fraction of their spending on new physical capital, "will encourage investment and boost both aggregate demand and aggregate supply.

This kind of policy was used effectively by President Kennedy in the 1960s and President Reagan in the 1980s." Explain why an investment tax credit may cause an increase in both aggregate demand and aggregate supply.

Reference no: EM131302812

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