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Difficulty: EasyReaganomics and Domestic Policy under Reagan and Bush

"The economic program of this administration is based on the premise that the key to economic growth and stability is to reduce the role of the federal government in the economy. This requires slowing the growth of government spending, reducing tax rates to stimulate work and investment, and removing the burden of unnecessary federal regulations."

—Economic Report of the President, 1982

Which of the following economic approaches is most directly reflected in the goals described in the excerpt?

  1. A
    Keynesian deficit spending
  2. B
    Mercantilist trade regulation
  3. Supply-side economicsAnswer
  4. D
    Great Society welfare expansion

Answer

Supply-side economics
The excerpt outlines the core tenets of supply-side economics, which was the foundation of Reaganomics in the 1980s. This approach argued that cutting taxes and reducing government regulations would incentivize investment and business productivity, thereby growing the overall economy.

Step-by-Step Solution

1
Analyze the source text to identify the stated economic objectives.
The excerpt advocates for reducing the federal government's role, slowing government spending growth, cutting tax rates to encourage investment, and reducing regulation.
This establishes the core economic principles promoted by the administration in 1982.
2
Match these principles to the correct economic theory among the options.
Cutting taxes and deregulating businesses to stimulate investment and production aligns directly with supply-side economics.
This identifies the option that matches the principles found in the text.

Key Concept

Supply-side economics (Reaganomics) sought to promote economic growth by reducing federal tax rates, deregulating industries, and slowing the growth of government spending.
Estimated Time:45s
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Topics

Reaganomics and Domestic Policy under Reagan and Bush

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