Impacts of government tax cuts in a closed economy

Abstract

Closed economies have been identified as having no real cases of conformity in modern times, mainly because with technological and cultural advances no country can be self-sufficient in obtaining development without trading with other countries, this paper attempts to address the impact of local macroeconomic variables on government tax cuts in a closed economy setting. We find moderate evidence to support this argument. In addition, using Keynesian model theory, four variables in the macroeconomy are examined. Evidence is found to support the qualitative changes produced by these four variables. In addition, the correspondence of a specific set of variable factors is examined. Although it is almost impossible to derive specific effects of these variables when open economies are considered as a whole, considerable commonality is found at the theoretical level. These results have implications for investors as well as governments, as they show that when taxes are reduced, there are simultaneous positive as well as negative effects for the economy, and governments can analyze the data to arrive at a tax value that is most favorable for the country's development.