Reaganomics
- Trying to stimulate production or supply output.
- To achieve this they cut taxes and government regulations to increase incentives for business and individuals.
- businesses invest and expand creating jobs and people work, save, ad spend more
- Laffer curve depicts a theoretical relationship between tax rates and tax revenues.
- Empirical evidence 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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