Income Tax Rate Cuts and Monetary Easing to Boost India’s Economic Growth

Correct! - Income tax rate cuts strengthen the incentive to work, increase the equilibrium quantity of labor. With more labor, potential GDP increases and economic growth occurs.

That's Right! - The lower the repo rate, the greater is the quantity of reserves demanded by commercial banks, and the greater is the quantity of money.

Well Done! - As the repo rate is lowered, short-term interest rates and the long-term real interest rate fall. Increases in consumption expenditure and investment increase aggregate demand, and real GDP increases.