Contrast “supply-side” economics with “demand-side” fiscal policy.
What will be an ideal response?
“Supply-side” economics advocates the use of government tax or spending policies to alter the supply schedule, that is, the production side of the economy. Tax reductions may have an expansionary effect on aggregate supply as well as aggregate demand. Some economists argue that as taxes are cut, savings and investment will increase. Also tax cuts could be aimed specifically at encouraging business investment such as investment tax credits. “Supply-side” economists also argue that tax increases can reduce tax revenues rather than increasing them due to a leftward shift in the aggregate supply curve which causes a decrease in domestic output.
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As nominal Gross Domestic Product (GDP) rises, the transactions demand for money
A) decreases, and the money demand curve shifts to the left. B) remains constant, and the money demand curve remains the same. C) increases, and the money demand curve shifts to the left. D) increases, and the money demand curve shifts to the right.
Jeff holds $50,000 wealth which has a utility of 7.07 utils (assuming utility is the square root of wealth in thousand dollars). He considers investing this in a gamble which has a 0.6 probability of increasing his total wealth to $100,000 and 0.4 probability of decreasing it to $30,000 . What will be Jeff's expected utility from the gamble?
a. 15 utils b. 8.19 utils c. 3.2 utils d. 12.12 utils
Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will
a. cause the consumer to buy more of good Y and less of good X. b. cause the consumer to buy more of good X and less of good Y. c. not affect the amount of goods X and Y that the consumer buys. d. result in an upward-sloping demand for good Y if the substitution effect is positive.
In a ________ economy, the behavior of buyers and sellers determines what gets produced, how it is produced, and who gets it.
A. utopian B. socialist C. command D. laissez-faire