April 24, 2017

Supply Side or Reaganomics

• Manipulating by enacting policies to stimulate incentives to work, save, and invest
• Part of this plan is to increase tax cuts which would increase disposable income
• Disincentives

Laffer Curve

• Displays theoretical relationship between tax rates and government revenue
• As taxes increase, consumers spend less

3 criticisms of the Laffer Curve

• 1) empirical evidence suggests that the impact of incentives to work, save, and invest are small
• 2) tax cuts increase demand which can fuel inflation
• 3) where the economy is actually located on the curve is difficult to determine