Supply- Side Economic (reaganomics)
-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 AS curve to the right.
-Always benefitting the company first
-Focus on marginal tax rates (amount paid on the last $ earned or on each additional dollar)
-Reduce marginal tax rate will encourage people to work longer in which they will forego their leisure time for extra income
-Lower taxes are incentives for businesses to invest in our economy
-Lower taxes are incentives for people to increase savings and therefore creates lower interest rates for increases in business investment
-Only believe in AS
-Reagan lowered the marginal tax rate to get the US out of a recession -> deficit
Xcode
Laffer Curve
-It is a trade off between taxes and government revenue
-Used to supply the side argument
-As tax rates increase to 0 Tax revenues increase from zero to maximum then declines
Criticism of this curve:
-research suggests that the impact of tax rates on incentives to work save and invest are small
-tax cuts also increase demand which can fuel inflation which will cause demand to exceed demand
-Where the economy is actually located on the curve is difficult to determine
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