Reaganomics

I.            Reaganomics

a.      Manipulating AS by policies to stimulate incentives to work, save, and invest

b.      Tax cuts

II.            Laffer Curve

a.      Displays the theoretical relationship between tax rates and tax revenues

b.      As taxes increase, people spend less.

c.       Criticisms:

                                                  i.      Empirical evidence suggests that the impact of tax rates on incentives to work, save, and invest are small.

                                                ii.      Tax cuts also increase demand which can fuel inflation

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