- Supply Side Economics or Reaganomics-
- Manipulating aggregate supply by enacting policies to stimulate incentives to work, save & invest.
- May include tax cuts, which would increase disposable income.
- Laffer Curve-
- Displays the theoretical relationship between tax rates & government revenue.
- 3 Criticisms of the Laffer Curve-
- Imperial evidence suggests that the impact of tax rates on incentives to work, save & invest are small.
- Tax cuts also increase demand, which can fuel inflation.
- Where the economy is actually located on the curve, is difficult to determine.
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