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Supply-Side Fiscal Policies

Definition

Supply-side fiscal policies are government actions aimed at increasing the productive capacity of the economy by stimulating investment, entrepreneurship, and production. These policies focus on reducing barriers to production and encouraging businesses to invest and expand.

Analogy

Think of supply-side fiscal policies as a turbocharger for the economy. Just like a turbocharger increases the power output of an engine by supplying more air, supply-side fiscal policies aim to boost economic growth by providing incentives for businesses to produce more goods and services.

Related terms

Tax Cuts: Tax cuts are one type of supply-side fiscal policy that involves reducing tax rates on individuals or businesses. This encourages people to spend or invest more money, which can stimulate economic activity.

Deregulation: Deregulation refers to removing or reducing government regulations on businesses. By cutting unnecessary red tape, deregulation aims to make it easier for businesses to operate and innovate.

Investment Incentives: Investment incentives are measures taken by the government to encourage businesses to invest in new capital equipment or research and development. These incentives can include tax breaks or subsidies that lower the cost of investment.