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Supply-side economics is a macroeconomic theory postulating that economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. [1] [2] According to supply-side economics theory, consumers will benefit from greater supply of goods and services at lower prices, and employment will increase. [3]
These policies are characterized as supply-side economics, trickle-down economics, or "Voodoo Economics" by opponents, [5] [6] including some Republicans, while Reagan and his advocates preferred to call it free-market economics.
In economics, aggregate supply (AS) or domestic final supply (DFS) is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms are willing and able to sell at a given price level in an economy. [ 1 ]
Based on supply-side economics, President Reagan implemented his economic policies in 1981. The four pillars of the policies were to: Reduce marginal tax rates on income from labor and capital. Reduce regulation. Tighten the money supply to reduce inflation. Reduce the growth of government spending.
Supply-side economics is a school of macroeconomic thought that argues that overall economic well-being is maximized by lowering the barriers to producing goods and services (the "Supply Side" of the economy). By lowering such barriers, consumers are thought to benefit from a greater supply of goods and services at lower prices.
These are referred to as the policy goals: the outcomes which the economic policy aims to achieve. To achieve these goals, governments use policy tools which are under the control of the government. These generally include the interest rate and money supply , tax and government spending, tariffs, exchange rates , labor market regulations, and ...
Over the next decade, he covered applications of supply-side liberalism on topics such as immigration [5] [6] and housing. [7] In 2017, Neil Irwin of the New York Times wrote about increasing the US labor pool in his article "Supply-Side Economics, but for Liberals", including via the earned income tax credit and child-care subsidies. [8]
A basis of supply-side economics is the Laffer curve, a theoretical relationship between rates of taxation and government revenue. The Laffer curve suggests that when the tax level is too high, lowering tax rates will boost government revenue through higher economic growth, though the level at which rates are deemed "too high" is disputed. A ...