Question

can someone help me? I'm not getting this question.. In 2001, President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). This bill called for large tax cuts just as the Economic Recovery Act of 1981 had and largely benefited the wealthiest Americans. President Bush’s approach to economics was very similar to that of President Reagan’s. Explain the assumptions behind the theory of supply-side economics, and describe the consequences of Reaganomics.

Answer 1

The phenomena that describe the direct relationship between money and spending is called the supply-side economics. This theory support Reagan and Bush beliefs of cutting the taxes encourage the people to work more and at the same time give back to the economy through consumer spending; it also allows more investors in business and industry. Unfortunately, the side effect of Reaganomics is the economic recession; it causes a high rate of unemployment for farmers and employees.

Answer 2

According to the theory of supply and demand, the market is self-adjusting and companies compete by prices, so the government should interfere as little as possible in the economy.

The government of Ronald Regan followed this logic and was considered a neoliberal government, which advocates reducing the taxation of companies as a form of incentive to production and consequently to the supply of economy, since the productive activity of the companies corresponds to the aggregate supply of an economy (everything that goes on sale in the market).

In addition to the reduction in corporate taxation, the economic package called "Reaganomics" implemented a reduction in public spending, a reduction in income taxation and a deregulation of the economy. The consequences were economic growth, but with increasing social inequality between rich and poor.