Aggregate Demand – Aggregate Supply model
In the period preceding the 1960 Presidential election, the economy was performing sluggishly. In one of the closest elections in U.S. history, the Democratic John Kennedy defeated the Republican, sitting Vice-President Richard Nixon. Following the election, the economy seemed to gather momentum. Yet in March 1962 the stock market experienced a major correction. Policy advisors surrounding the President urged that legislation be enacted providing a significant tax cut, with cuts in corporate tax rates and reductions in the overall progressivity of the income tax schedules. These “Kennedy Tax Cuts,” enacted prior to the 1962 Congressional elections, provided a major stimulus to the U.S. macroeconomy and began one of the longest periods of sustained real economic growth in the twentieth century.
Use the Aggregate Demand – Aggregate Supply model to describe the business cycle the U.S. macroeconomy has experienced during the early to middle 1960s.
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