Question

Explain the Assumption behind the theory of supply-side economics and describe the sequence of Reagannomics

Answer 1

The assumption behind the theory of supply-side economics is that businesses would use excess capital (money) to hire more workers.

In Reaganomics businesses would receive large tax cuts, which would leave them with more capital (money). After that, the businesses would use this money in order to hire more workers. These workers would then be able to make more products/goods and also would be able to buy more goods themselves since they would have a steady income.