Question

11. Why cut regulations from the supply-side perspective?

12. Why cut social spending and privatize services?

13. What happened to corporate competition during this period?

Answer 1

Answer 11:

Cutting regulations will help in increasing the quantity supplied at each price level. This is because cutting regulations will help in increasing production as well as sales of the firms which will lead to the rightward shift of the aggregate supply curve in the economy. Thus, it will lead to fall in price level and also increase the level of Real GDP in the economy. Thus, cutting regulation help firms in increasing production levels and thus reduce inflation rate in the economy.

Answer 12:

Cutting of social spending will help government in reducing deficit which is determined by the difference between tax revenue of the government and the government spending. If services are privatized then a large portion of the government spending will get reduced and fiscal deficit of the government will come down.

Answer 13:

All this mentioned above will lead to increase in corporate competition and this will help in increasing the efficiency of corporate firm in the economy.