Crowding-out occurs when fiscal policy affects interest-sensitive expenditures. A complete crowding-out occurs when the decrease in investment expenditures is equal to the increase in government expenditures. A partial crowding-out occurs when the decrease in investment expenditures is less than the increase in government expenditures (Froyen, 2003).
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 other than at its level of potential income, the structural deficit or surplus is the deficit or surplus that would remain even if the economy were functioning at its potential income level. These remainders are referred to as a "passive surplus" or a "passive deficit". A passive deficit also is known as a cyclical deficit (Colander, 2004)
The M1 is one of several measures of the supply of money in an economy. The M1 is the narrowest measure of the money supply, which means that the M1 includes the fewest classifications of money. Included in the M1 measure of the m...