Supply Side Policies

Supply-side economics are policies designed to stimulate output and lower unemployment by increasing production rather than demand. The supply-side view gained support in the late 1970s because demand-side policies did not seem to be controlling the nation's growing unemployment and inflation. In the 1980s, supply-side policies became the hallmark of President Reagan's administration.

The differences between supply-side economics and demand-side economics are smaller than most people realize. Both policies, which are summarized in Figure 16.7, have the same goal—that of increasing production and decreasing unemployment without increasing inflation.

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Figure 16.8



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