Question

The school of economic thought which argues that through tax reductions, and deregulation, government creates the proper incentives for the private sector to increase aggregate supply is known as the:

a. supply-side school.
b. new classical school.
c. classical school.
d. neo-keynesian school.
e. rational expectations school.

Answer 1

The school of economic thought which argues that through tax reductions, and deregulation, government creates the proper incentives for the private sector to increase aggregate supply is known as the supply-side economics.

Supply-side economics is a macroeconomic theory that recommends lower taxes and deregulation to increase the supply of capital, jobs and labor.