Reaganomics

Supply side economics (Reaganomics):  is the belief that the AS curve will determine levels of inflation, unemployment, and economic growth. 
To increase the economy, the AS curve should shift to the right which will always benefit the company first. Named after Reagan because he lowered the marginal tax rate to get the US out of a recession which led to a deficit.

Supply side economists focus on the marginal tax rate. 
They support policies that promote GDP growth by arguing that the high marginal tax rate along with the current system of transfer payments provide disincentives to work, invest, innovate, and undertake entrepreneurial ventures.

Marginal tax rate: the amount paid on the last dollar earned or on each additional dollar earned. 
- By reducing the marginal tax rate, supply siders believe that you will encourage more people to work longer and forgo leisure time for extra income

Laffer Curve: It is a tradeoff between tax rates and government revenue. It is used to support the supply side argument. When people save money, money "flees" which means it's not in circulation.

Criticisms of the Laffer Curve:

1. Research suggests that the impact of tax rates on incentives to work, save, and invest are small

2. Tax cuts increased demand which can fuel inflation and causes demand to exceed supply

3. Where the economy is actually located on the curve is difficult to determine