Create a new account

It's simple, and free.

Contemporary State of Supply Side Economics

This research examines the contemporary state of supplyside economic theory. Supplyside economic theory is an approach to fiscal policy.1 Supplyside economic theory opposes the Keynesian model, in which aggregate demand is the propelling force.2

BACKGROUND ON THE IMPLEMENTATION OF

The Keynesian model was based on the premise that, until the capacity constraint is reached within an economy, supply remains passive.3 In this model, supply always reacts to the stimulus of aggregate demand.4 Thus, in the Keynesian model, there is a link between a fullemployment deficit or surplus, and aggregate demand.5 Within this model, thus, fiscal policy

1J. D. Gwartney, R. Stroup, and A. H. Studenmund, Economics, 5th ed. (New York: Academic Press, 1989), 297.

2R. B. Ekelund, Jr., and R. F. Hebert, A History of Economic Method, 3rd ed. (New York: McGrawHill Book Company, 1988), 430445.

3Gwartney, Stroup, and Studenmund, 176183.

2attempts to stimulate demand, as a means of promoting economic growth.

In the late1970s, the Keynesian model appeared to be losing its ability to accurate explain economic events, as the phenomenon of stagflation developed. Supplyside fiscalists stepped into this apparent breech. The supplyside fiscalists emphasized the interrelationship between governmental tax and expenditure policy, and aggregate supply.6 It was the contention of the supplyside fiscalists that relative price changes induced through governmental tax and expenditure policy would generate production incentives; thereby promoting economic growth. For fiscal policy, the supplysiders argued for tax reductions, and governmental spending reductions.

The supplyside approach to fiscal policy was madetoorder for the Reagan campaign for presidency in 1980. What the Reagan faction desired above all elseeven above the defeat of Communismwas reduction in taxes and government spending. Thus, subsequent to the in...

Page 1 of 11 Next >

More on Contemporary State of Supply Side Economics...

Loading...
APA     MLA     Chicago
Contemporary State of Supply Side Economics. (1969, December 31). In LotsofEssays.com. Retrieved 01:25, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1691465.html