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Supply-Side Economics
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Flashcards
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Accelerated Depreciation
A tax policy that allows businesses to write off the cost of capital expenditures faster than the assets actually wear out. In policy, it encourages businesses to invest in new equipment, leading to potential economic growth through increased productivity.
Capital Formation
The process of building up the capital stock of a country through investing in productive plants and equipment. In policy, supply-side economics encourages capital formation through tax incentives and other fiscal measures to enhance economic growth.
Tax Reform
The process of altering tax policies to simplify the tax system, make it more equitable, and promote economic objectives. Supply-side tax reform might focus on lowering tax rates and broadening the tax base to stimulate growth.
Inflation
The rate at which the general level of prices for goods and services is rising. Supply-side economics addresses inflation by emphasizing the importance of a stable currency and monetary policy that focuses on controlling the money supply.
Enterprise Zones
Designated areas within a country that provide tax concessions, infrastructure incentives, and reduced regulations to attract investment and job creation. Supply-side policy uses these zones to stimulate economic growth in underdeveloped areas.
Work Incentives
Policy measures designed to encourage individuals to work and increase their productivity. Supply-side economics often supports tax cuts as work incentives, promoting the belief that individuals will work harder if they can retain more of their earnings.
Fiscal Stimulus
Government policy that aims to stimulate economic activity through government spending and tax cuts. Supply-side economists focus on the tax cut component, arguing that it can lead to more productive investment and job creation.
Trickle-Down Theory
An economic theory suggesting that benefits provided to the wealthy will eventually 'trickle down' to the rest of the economy, particularly through investment and job creation. In policy, it translates to tax breaks and benefits for high-income earners and businesses.
Deregulation
The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. In policy, supply-side economics posits that deregulation helps reduce costs and improve efficiency, bolstering economic activity.
Excise Taxes
Taxes paid when purchases are made on a specific good, often included in the price of the product. From a supply-side perspective, reducing excise taxes can decrease the cost of goods, thereby potentially increasing demand and stimulating production.
Privatization
The transfer of ownership of property or businesses from a government to a privately owned entity. Supply-side policies advocate for privatization to foster competition, improve efficiency, and reduce government spending.
Human Capital
A measure of the economic value of an employee's skill set. With supply-side policy, investing in human capital, like education and training, is considered crucial for economic growth and improving productivity.
National Debt
The total amount of money that a country's government has borrowed, by various means. Supply-side economics contends that by stimulating growth, increased tax revenue can eventually help pay down the national debt.
Laffer Curve
A theory that suggests there is an optimal tax rate that maximizes government revenue. In policy, it's applied to justify tax cuts, with the belief that lower taxes can lead to economic growth which in turn might increase total tax revenue.
Supply-side Fiscal Policy
Economic policies aimed to increase the ability and incentive to produce goods and services. It typically involves tax cuts and decreased regulation. In policy, used to stimulate business investment and economic expansion.
Reaganomics
The economic policies promoted by U.S. President Ronald Reagan in the 1980s, primarily advocating for lower taxes, deregulation, and government spending cuts. In policy, these were leveraged to boost economic growth, investment, and the job market.
Capital Gains Tax
A tax on the profit from the sale of property or an investment. Supply-side policies often advocate for lower capital gains taxes as a way to encourage investment and spur economic growth.
Monetarism
The economic theory that the management of the money supply is the key to controlling inflation and economic health. In policy, monetarists favor controlling the supply of money to regulate the economy.
Supply-side Tax Cuts
Tax reductions aimed at businesses and high-income earners to incentivize production and economic investment. In policy, these cuts are meant to create more goods and services, ultimately growing the economy and potentially increasing total tax revenue.
Investment Tax Credits
Tax credits designed to encourage businesses to invest in certain resources like equipment and buildings. Applying these in policy is seen as an incentive for companies to modernize or expand their productive capacity, which can lead to economic growth.
Economic Growth
An increase in the production of goods and services over a specific period. Supply-side policies aim to foster economic growth by creating a favorable environment for businesses to invest and expand.
Rational Expectations Theory
A theory which suggests that individuals and businesses make decisions optimally, taking into account all available information and past experiences. In policy, it implies that anticipated supply-side policies, like tax cuts, can influence current economic behavior and planning.
Balanced Budget
A financial plan where revenues are equal to expenditures, thus not creating a deficit. While not a direct supply-side concept, supply-siders might argue that a balanced budget can be achieved in the long term through policies that stimulate economic growth and thereby boost tax revenues.
Corporate Tax Rates
The tax imposed on the net income of corporations. Supply-siders argue that lower corporate taxes encourage investment and economic expansion, thereby potentially increasing overall employment and productivity.
Marginal Tax Rates
The rate at which tax is incurred on an additional dollar of income. In policy, decreasing marginal tax rates is believed to encourage investment and economic growth by allowing individuals to keep more of their additional earnings.
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