Supply-side economics or Reagonomics
- Stimulate production or supply to spear output
- They cut taxes and government regulation, to increase incentive for business and individuals
- Business invest and expand creating jobs
- People work, save, and spend money
Laffer Curve
It depicts a theoretical relationship between tax rates and tax revenues.
- The lower the taxes the more the government is able to collect in taxes
Criticism of the Laffer Curve
- Empirical evidence suggest suggest that the impact of tax rates on incentives to work, save, and invest are small
- Tax cuts also increase demand which can fuel inflation and demand impacts may exceed supply impacts
- Where the economy is actually located on the Laffer Curve is difficult to determine
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