Question

Which was a fundamental element of supply-side economics?

A. corporate tax hikes
B. marginal tax cuts
C. economic regulation
D. wage increases
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Answer 1

The fundamental element of supply-side economics is marginal tax cuts, which aim to stimulate economic growth by incentivizing work and increasing the supply of goods and services.

Step-by-step explanation:

A fundamental element of supply-side economics is marginal tax cuts. This approach argues that reducing income tax rates and other taxes would lead to an increase in labor supply as people would be incentivized to work more, knowing they would keep a larger portion of their income. Supply-side economics, a term closely associated with the policies of President Ronald Reagan in the 1980s, holds that such tax cuts can potentially increase overall economic productivity and even tax revenues, through greater economic activity.

The increase in the after-tax real wage is supposed to encourage more labor supply, which in turn increases the production of goods and services. This diverges from the view that stimulating aggregate expenditure primarily increases real GDP, focusing instead on increases in potential output. Supply-siders believe that over time, the positive effects of tax reductions on work incentives and productivity could offset the initial decrease in tax revenue.

Answer 2

A fundamental element of supply-side economics is marginal tax cuts.

Step-by-step explanation:

Supply side economics endorses, increased production as the driving force behind economic growth. That is influenced by several factors such as Capital, Labour, Entrepreneurship and land. The Fiscal policy of supply side focuses more on creating a better environment for all kind of businesses. Its tools are deregulation and tax cuts. Accordingly the companies that are benefited by the policies are able to hire more workers, which results in the creation of more jobs thereby boosting the economy.