Supply- Side economics/ Reganomics: -trying to stimulate production of supply to spur output
1) Cut taxes & government regulations to increase incentives for business and individuals 2) Business invest and expand creating jobs 3) People work, save, and spend more.
Laffer Curve: -Depicts a theoretical relationship between tax rates and tax revenues
Criticisms of the Laffer Curve:
1) Empirical evidence suggests that the impact of the tax rates on incentives to work, save and invest are small. 2) Tax cuts also increase demand, which can feel inflation and demand impacts may exceed supply impacts. 3) Where the economy is actually located on the Laffer curve is difficult to determine.
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