ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Supply-side economics is an economic theory that postulates tax cuts for the wealthy result in increased savings and investment capacity for them that trickle down to the overall economy.

Detailed explanation-2: -They argued that if people could keep a higher fraction of their income, people would work harder to earn more income. Even though tax rates would be lower, income would rise by so much, they claimed, that tax revenues would rise.

Detailed explanation-3: -Supply Side economists believe that changes in tax rates will affect aggregate supply as well as aggregate demand.

Detailed explanation-4: -Supply side constraints, which are now being referred to as a major problem, simply mean that production in the economy is unable to keep pace with rising demand due to a variety of factors such as inadequate infrastructure, lack of credit, availability of labour and availability of technology.

Detailed explanation-5: -Based on the principles of supply-side economics and the trickle-down theory, Reaganomics proposed that decreases in taxes, especially for corporations, stimulate economic growth. If the expenses of corporations are reduced, the savings then “trickle down” to the rest of the economy, spurring overall growth.