Supply Side Model of Economics Research Paper Example | Topics and Well Written Essays - 500 words

Supply Side Model of Economics - Research Paper Example This paper discusses the assumptions of the supply side model of economics, highlighting on its features, assumed benefits and the role the government plays in it. It further highlights the reasons and when the model was introduced, whether it is a viable model in current economics and its downfalls. Supporting the idea that supply (or production) of goods and services is significant for economic growth, supply side economics attempts to explain macroeconomic phenomena as well as offer policies for steady growth Through a period of time, the improved growth in the economy will create a larger tax base that will compensate revenue that was lost through the tax cut. Also referred to as trickle-down economics, it is based on the theory that income tax cuts mean workers get higher pay that they can spend and provides entrepreneurs and investors an incentive to invest and save Supply side economics argues for three key policies which are tax, regulatory and monetary. The supply curve of the model bends backwards, with the assumption that tax cuts can unlock significant growth in the supplied quantity of productive resources to the economy, in terms of capital and labor and increasing Gross Domestic Product The supply side theory believes that producers, as well as their enthusiasm to produce services and goods, are the ones that determine the rate of economic growth. The supply side model assumes that less regulation will allow greater supply levels services and goods for the benefit of consumers at lower prices.