All Terrain Thinking

A Compendium of things I think are Important

Economics: It's not just whats' in your wallet

Questions of the Day
1980s: Supply-side Economics

1. Are we ready for a little more complication in your macro model? One reason to do it is that it allows us to help explain the emergence of Ronald Reagan on the national political scene. He seized the moment, he identified the 'wave' of public sentiment and rode it into the White House. The problem was that there was no leadership on the economy which was suffering through a second case of stagflation within a decade?  What was the problem that he proposed to fix? Please demonstrate the situation with AS-AD diagrams.

2. And how did he propose to solve stagflation? Identifying the problem is only half the battle. What can we do to solve the problem? What was the name given to his 'package' of reforms designed to right the course of the American economy? Please use the diagrams from class to demonstrate the Reagan solution to our problem.

3. Ronald Reagan led a revival of the conservative movement in the presidential election of 1980. What were the three key pieces of the conservative agenda and what were the problems associated with the achievement of each one?

4. George Bush called Reagan's economic policies "voodoo economics" while Herbert Stein called them "the economics of joy." Both individuals were reacting to Reaganomics' painless solution to stagflation. What were the roles of the Arthur Laffer and Robert Lucas in Reagan's solution?

5. Output in an economy can be expanded by increasing the level of resources or the productivity of those resources.  What were the 'pieces' of Reagan's economic package and how did they all work together to increase the supply of resources and productivity?

6. Please explain the significant differences between the inflation caused by the military build-up for Vietnam in the late 1960s and the inflation caused by the OPEC price increase in the early 1970s.[you may want to use the AS-AD model].

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