- The price of bonds decrease when interest rates increase
- Supply side economics – manipulate AS by enacting policies. Designed to stimulate incentives to work, save, and invest. Example: tax cuts increase disposable income.
- Laffer curve – theoretical relationship between tax rates and government revenues.
- Criticisms of the Laffer curve:
- Empirical evidence suggests that the impact of tax rates on incentives to work, safe, and invest are small.
- Tax cuts also increase demand which can fuel inflation.
- When the economy is actually located on the curve is difficult to determine.
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