MACROECONOMIC CONCEPTS

The Laffer Curve was developed by George Laffer, sociologist turned self-styled economist. The Laffer Curve is supposed to be a graphical representation of the relationship between tax revenues and tax rates. Under the parameters of the Laffer Curve, tax revenues are zero when tax rates are 0.0% and 100%, but are maximized as tax rates move toward the center. The Laffer Curve was one of the foundations of the "voodoo economics" of the supply-side Reagan Administration (Razin, Sadka, & Swagel, 2002).

A proportional income tax is a type of income tax that is more commonly referred to as a "flat tax". A proportional tax is a tax wherein the same rate is applied to all persons or things taxed. Thus, a proportional income tax is an income where a uniform tax rate is applied to all taxable income, regardless of how high or how low the income level may be (Colander, 2004).

The concept of a "cyclical deficit" is related to the concept of a "structural deficit or surplus". If an economy is functioning at al level

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cal policy increases the demand for money while increases in the price level reduce the real value of money, interest rates increase. Thus, the increased activity by government crowds-out investment expenditures because of the increased interest rates required to obtain investment capital (Froyen, 2003). Thus, because of crowding-out a demand-side fiscal policy become less effective over time. Over the longer-term, an expansionary demand-side fiscal policy has a negative effect on real GDP because the long-range aggregate supply (LRAS) curve does not change. Over the longer-term, and expansionary fiscal policy increases the price level and the short-term aggregate supply (SRAS) curve shifts to the left. Thus, the AD curve intersects the LRAS curve at a point reflecting a higher price level and a lower real GDP (Froyen, 2003). 2. Progressive, Proportional, & Regressive Income Taxes A progressive income tax structure is one in which the tax rate applied to taxable income increases as the level of taxable income increases. A proportional income tax structure is one in which the tax rate applied to taxable income remains unchanged regardless of the level of taxable income. A regressive income tax structure is one in which th
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Some common words found in the essay are:
Fiscal Policy, Growth Model, P*Q Colander, Reserve System, Transaction Costs, Hold Money, Comparative Advantage, Alexander Hamilton, Income Taxes, United Income, money supply, economic growth, income tax, federal reserve, income tax structure, tax structure, federal reserve system, reserve system, fiscal policy, taxable income, velocity money, colander 2004, infant industry argument, progressive income tax, regressive income tax,
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Approximate Pages = 16 (250 words per page)

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