Supply Side Economics

.Makes changes in AS but not AD and it determines the level of inflation, unemployment, and economic growth.

.Lower marginal tax rate induce more work this AS increases.

.Makes leisure more expensive and make work more attractive.

Supply Side Economics- Support policies that promote GDP growth by arguing that high marginal tax rates along with the current system of transferred payment

Ex. Unemployment compensation,

Welfare Programs that provided disincentives to work, invest, innovate and undertake entrepreneur inventions.

Incentive to Save and Invest

.High Marginal Tax Rate can reduce the rewards for savings and investments

.Consumption might increase, but investment depend upon savings

.Lower Marginal Tax Rates encourage saving and investment