Supply Side Economics And The Recession Of 2007-2009Abstract Supply-Side Economics is a theory that by lowering taxes for business there will be more production, lower prices, and more consumer spending to control the inflation level. This was a theory used during the Great Recession of 2007-2009 to lower the unemployment rate and raise the overall Gross Domestic Product in the United States.KeywordsSupply Side Economics, Macroeconomics, Laffer Curve, Trickle Down Economics, RecessionSupply-Side Economics Supply-Side Economics, also known as Reaganomics,  is an “economic theory that holds that, by lowering taxes on corporations, government can stimulate investment in industry and thereby raise production, which will, in turn, bring down prices and control inflation” In theory Supply Side Economics argues that economic growth can be achieved by lowering taxes for investors and entrepreneurs and decreasing big business regulation to allow them to save and invest and for that money to trickle down into the overall economy. This should also benefit the consumers by offering them a greater supply of goods at a lower price which should in turn decrease the unemployment rate. Reagan put supply-side economics into effect in the 1980s. Reagan cut the marginal income tax rate from 70 percent to 28 percent. He also reduced the corporate tax rate from 46 percent to 40 percent. That in turn boosted the economy out of the worst recession since the Great Depression. Reagan also doubled the national debt while he was in office. According to Keynesians, that also boosted economic growth by putting more money into the economy, creating jobs and increasing demand.Laffer Curve The Laffer Curve is a theory that states lower tax rates boost economic growth. Economist Arthur Laffer developed it in 1979. He argued that that lowering tax rates has an immediate effect on the economy and that they are a one for one ratio. For each dollar that is cut from taxes there is a one dollar reduction in government spending. This theory also has a multiplier effect on economic growth. Every dollar in tax cuts causes increased demand. That’s because it stimulates business growth, which results in additional hiring and lowering of the unemployment rate.Recession Of 2007-2009 An economic recession is typically defined as a decline in gross domestic product (GDP) for two or more consecutive quarters. GDP is the market value of all goods and services produced within a country in a given period of time. The causes of a recession are typically a reduction in the amounts of goods being sold, a slow down in overall business, and a general slowdown in economic activity. In 2007 many Americans were left without jobs and without a way to pay their bills, living in houses they could not afford after being pressured into buying them with complex and tricky mortgages.The job loss during the Recession has meant that family incomes have dropped and poverty has risen. The bursting of the housing bubble has meant that family wealth has dropped dramatically, as well. With an increase in the overall Gross Domestic Product (GDP) and a decrease in the unemployment throughout several quarters, the recession finally came to an end in June of 2009.Conclusion In conclusion it is still debated whether or not tax cuts lead to increased economic growth over the long-term. Studies do mention that, in the short-term and in an economy that is already weak, tax cuts will provide an instant boost. However, over the long term, and in a steady economy, this will put downward pressure on the dollar which would increase inflation.

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