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Unformatted text preview: d substantial growth. Third, and likely most important, there have been important improvements in technology so th at the economy
can produce more output, even if input resources had stayed the same. The productivity of workers is also improved by the higher capital stock, improved
technology, and greater skill of the labor force. Each worker can produce more when he or she is better educated and has acc ess to more capital equipment and
better technology. You could have also listed many other d etailed factors that affect potential output, including tax rates that alter incentives to work, save, and
invest, government regulations, the preferences for saving and consumption of the population, etc.
2. The primary emphasis of Reagan's supply-side economics was to change tax policy to improve “incentives” to work, save, invest, and develop new technology. Cutting income tax rates will increase an individual's disposable income. If workers are able to take home a larger portion of each dollar they earn, they have an
increased incentive to supply...
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- Fall '13