Question

What was the state of the economy prior to Reagan implementing supply side economics? What were some of the policies implemented by the Reagan administration? What was the outcome? Explain your rationale. 200 words or more

Answer 1

Prior to the Reagan administration, the United States economy experienced::-

? decade of rising unemployment and inflation in terms stagflation.

?Political pressure favored stimulus resulting in an expansion of the money supply.

?Reagan's approach was a departure from his immediate predecessors. Reagan enacted lower marginal tax rates as well as simplified income tax codes and continued deregulation.

the domestic policy of the Ronald Reagan administration from 1981 to 1989. Reagan's policies stressed conservative economic values, starting with his implementation of supply-side economic policies, dubbed as "Reaganomics" by both supporters and detractors. His policies also included the largest tax cut in American history as well as increased defense spendingas part of his Soviet strategy. However, he significantly raised taxes four times due to economic conditions and reforms.

Based on supply-side economics, Reagan implemented his economic policies in 1981. The four pillars of the policies were to:

1. Reduce marginal tax rates on income from labor and capital.
2. Reduce regulation.
3. Tighten the money supply to reduce inflation.
4. Reduce the growth of government spending.

Outcome

Reagan sought to stimulate the economy with large, across-the-board tax cuts. The expansionary fiscal policies soon became known as "Reaganomics",and were considered by some to be the most serious attempt to change the course of U.S. economic policy of any administration since the New Deal. His radical tax reforms, in combination with a curb on domestic social spending, harsh restraints applied by the Federal Reserve Board under Paul Volcker on the nation's money supply, and heavy government borrowing required to finance the budget and trade deficits, as well as military expenditures, produced significant economic expansion and reduced inflation. Inflation was reduced by more than ten percentage points, reaching a low of 1.9% annual average inflation in 1986.