1. Bell Work
What do you think might be some of the differences between Demand-Side Policies and Supply Side Policies?

2. Clarification Multiplier Accelerator
A change in investment spending can cause a change in overall spending
Accelerator
A change in overall spending can cause a change in investment spending

3. Quiz Link: https://goo.gl/HX938H

4. Today I will Compare and contrast supply-side and demand-side policies
Discuss the limitations of supply-side policies
Compare the aggregate supply curve for the economy to the supply curves of individual producers

5. Key Vocabulary
Supply-side policies
Laffer curve
deregulation

6. Supply-Side Policies
Chapter 15, Lesson 2

7. Goals of Supply-Side Policies
Origins of Supply-Side Economics
1970s Stagflation
High unemployment
High inflation
Demand-side policies didn’t seem to be able to handle the crisis
Ronald Reagan offered a solution that shifted focus to producers (supply side)

8. Goals of Supply-Side Policies
A Smaller Role for Government
Larger government dampens production and slows growth
Need to cut the number of agencies
Cut federal spending
Congress was unwilling to decrease the number of agencies
Reagan cut tax rates to increase deficits and force agency reductions

9. Goals of Supply-Side Policies
Lower Federal Taxes
Lower tax rates allow individuals to keep more of their money
Keeping more money will encourage people to work harder
People will be able to spend more and increase demand

10. Goals of Supply-Side Policies
The Laffer Curve
Economic theory that a lower tax rate would produce higher tax revenues because of increase economic activity
Used by Reagan to justify the reduces tax rates
While the decreased tax rate did stimulate some economic growth, increased revenues never happened and deficits grew to record levels

11. Goals of Supply-Side Policies
Deregulation
Relaxing or removing government regulations
Believe that competition in a free market will keep firms in line
Consumers will avoid firms that act unfairly and force them to correct their ways or go out of business
Since the 1980s there has been massive deregulation
Airlines
Banking
Telecommunications
Trucking
Deregulation of Savings and Loans in the late 1980s led to massive S&L failures in the 1990s

12. Impact and Limitations of Supply Side Policies
President Reagan’s Budget Priorities
Cut domestic programs by $39 billion in just his first year in office
Increased national defense spending
Overall increased government spending by 2.5%

13. Impact and Limitations of Supply Side Policies
Tax Rates and Economic Growth
GDP did increase for 92 months
However increased military spending provided much of that record growth

14. Impact and Limitations of Supply Side Policies
Tax Rates and Revenues
Reagan tax cuts lowered revenues
Clinton tax increases increased revenues
Bush tax cuts lowered revenues again
Tax cuts = increased revenue has been proven false

15. Impact and Limitations of Supply Side Policies
Deregulation and Economic Growth
Both demand and supply siders favor policies that
Promote productivity
Reduce unnecessary paperwork
Stimulate the economy
Supply-side Policies have made the economy less stable
Tax structure became less progressive
“Safety Net” programs were weakened

16. Impact and Limitations of Supply Side Policies
Supply and Demand Siders – A Final Comparison
Both demand and supply side have the same goals
Increasing production
Decreasing unemployment
Slow, steady inflation
Demand siders focus on policies that stimulate demand
Supply siders focus on policies that stimulate supply

17. Activity
Create a political cartoon that illustrates one or more of the concepts related to supply side economics.
You should include relevant people (Reagan, Either or both Bushes) or events (deregulation)

18. What are 3 differences between supply and demand side policies?
Reflection
What are 3 differences between supply and demand side policies?
What is one similarity?