supply-side economics

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Supply-side economics

A theory of economics that reductions in tax rates will stimulate investment and in turn will benefit the entire society.

Supply-Side Economics

A macroeconomic theory that a government can best promote growth by providing incentives for persons to produce goods and services. The primary way a supply-side oriented government does this is by maintaining low tax rates so that investors and entrepreneurs may use their money toward production. Maintaining low tax rates on the wealthy is one of the most important and controversial aspects of supply-side economics; the theory states that well off persons have the capital available to produce goods and services and thereby create jobs and grow the economy. Critics contend that this does not happen in reality, and that the wealthy are more likely to keep, rather than invest, their money. In the United States, supply-side economics was crucial to the economic policy in the Ronald Reagan administration. See also: Keynesian economics, Monetarism, Trickle-down economics.

supply-side economics

The branch of economics that concentrates on measures to increase output of goods and services in the long run. The basis of supply-side economics is that marginal tax rates should be reduced to provide incentives to supply additional labor and capital, and thereby promote long-term growth.

supply-side economics

the branch of economic analysis concerned with the productive capability of an economy (POTENTIAL GROSS NATIONAL PRODUCT) and with policies that attempt to expand the stock of factors of production and to improve the flexibility of factor markets so as to generate the largest possible output for a given level of AGGREGATE DEMAND. Supply-side economists have examined institutional rigidities in factor markets and the effect of higher factor prices in ‘pricing people out of jobs’. This has led them to condemn the activities of trade unions in labour markets on the grounds that trade unions impose RESTRICTIVE LABOUR PRACTICES (such as overmanning and demarcation boundaries) and push WAGE RATES up to levels that exceed the MARGINAL REVENUE PRODUCTIVITY of the workers concerned, thereby causing UNEMPLOYMENT and COST-PUSH INFLATION. Such ideas have also led supply-side economists to condemn certain SOCIAL-SECURITY BENEFITS systems and PROGRESSIVE TAXATION systems for creating a POVERTY TRAP that acts as a disincentive for the unemployed to take low-paid jobs.

More broadly, supply-side economics has been concerned with ways in which the AGGREGATE SUPPLY SCHEDULE can be shifted outwards so as to enable more output to be produced in response to growing aggregate demand without raising the PRICE LEVEL.

Governments may adopt supply-side policies to increase the stock of factors of production and to improve the efficiency of resource use by promoting the flexibility of markets in responding to demand changes. These policies include reductions in taxation and other disincentives to work to increase labour participation rates; financial incentives to increase capital investment in plant and equipment and promote similar investments in process and product invention and innovation; education and training policies to improve the supply of required skills; more competition in the financial sector to improve the efficiency of capital markets; privatization and reduced government control of industry (deregulation) to encourage industrial efficiency; regional policy assistance, private rented accommodation and portable pensions to encourage labour mobility; lower tax rates and changed social security benefits to provide incentives to work harder and take risks; curbs on the power of trade unions to improve the flexibility of labour markets, wider share ownership and assistance to the self-employed to promote enterprise culture. These measures can help to increase economic growth rates and reduce unemployment. See also NEGATIVE INCOME TAX, PROFIT-RELATED PAY, LAFFER CURVE.

References in periodicals archive ?
But if running a high-pressure economy stimulates the supply side, we might expect a further acceleration in capital investment that not only charges the demand side of the economy, but accelerates productivity growth, too.
Exhibiting at Supply Side West creates the opportunity to communicate with high-end decision makers in the US market with the potential to generate revenues for different formulations and presentations across numerous applications at multiple points in the value chain with US and international partners.
There is a need to thresh out the channel of distribution on the supply side to expose the horrors of extrajudicial killings (EJKs).
Besides the lacking domestic demand there are two other important factors which darken the economic performance of Germany: tight money policy of the central bank--Deutsche Bundesbank and since 1999 the European Central Bank respectively and the too-narrow supply side orientation of the German governments.
Kelly Bristol has been named show manager of The Supply Side and will report to Robinson.
Our belief is that although our members do their part to conserve energy and reduce demand, the Federal Government must put a national energy policy in place to address the supply side of the equation.
The surprising part of the consolidation trend in the supply side of the produce industry is that it has not yet led to a decrease in the number of suppliers.
The broad version, which most American economists came to share in the late 1970s, is the view that the supply side of an economy - saving, investment, technological progress, and the size and productivity of the labor force - is what matters for output in the long run.
It is questionable whether challenging the supply side is legitimate, besides, wasting tax dollars on an attempt to suppress the supply side and holding gun makers accountable could prove to be futile.
Data from the Reagan presidency, the last time supply side economics actually was applied, confirms that tax rate reductions were followed by significant improvements in employment, output, and income.
Then, shifting into a squishy moral relativist mode, he says that a Christian can go either way: supply side or Buchananite "nationalist," it's just a matter of - yes, choice.
Synergistic effects may exist on either the demand side, the supply side, or both.