One such rule is to fix the growth rate of the money supply. 8a Supply side economists argue that decreases in marginal tax rates may increase long run aggregate supply. Give some examples of industries that were deregulated in the 1980s and explain how deregulation might increase aggregate supply. According to the Laffer curve, it is possible to cut tax rates and increase tax revenue. Draw a Laffer curve and be sure to label the axes.
Deficits are highly sensitive to economic conditions.
If the economy goes into a recession, the budget deficit is likely to grow. Give some examples and explain how they help stabilize the economy. Explain why this is the case.