Friday, May 1, 2015

Supply-Side Economics

Supply-side economists tend to believe that the AS curve will determine levels  of inflation, unemployment, and economic growth

To increase the economy you take actions to shift the AS curve to the right, always benefiting the company first.

They focus on marginal tax rates (the amount paid on the last dollar earned or on each additional dollar).

If they reduced the marginal tax rates you encourage more people to work longer in which they will forgo their leisure time for extra income.

Lower taxes are an incentive for businesses to invest in our economy.

Lower taxes are incentives for people to increase savings and therefore create lower interest rates for increases in business investment.

They believe only in AS, not AD

Reaganomics

  • Lowered the marginal tax rate to get the U.S. out of a recession --> led to a deficit

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