Supply-side economics is a theory in macroeconomics

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Supply-side economics is a theory in macroeconomics that lowering barriers in goods and services, along with investment in capitol will effectively create economic growth. This describes that more jobs will be created because consumers will benefit more from a large supply of goods at lower prices. This allows investment and expansion of businesses to expand their demand for employees, creating more jobs. Supply-side economics is based on the Laffer Curve. It was developed in 1979 by economist Arthur Laffer. He argued that the effect of tax cuts on the federal budget are immediate. For every dollar cut in taxes reduces government spending by exactly one dollar. President Reagan put supply-side economics into practice in the 1980s, which is why it is also known as Reaganomics. He used it as a defense for stagflation, which is a combination of high inflation and stagnant economic growth.

Reference no: EM131172343

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