On the Laffer-Keynesian Synthesis

Abstract

Keynesian models deal with the situation when aggregate supply is not dependent on tax rates, while aggregate demand, especially the part of it that relates to consumption, is the function of taxes. Supply-side economics also considers only a single aspect of the tax issue in the Laffer Curve, which emphasizes the impact of the tax rate on aggregate supply. The single-sidedness of the above theories can be overcome by the Laffer-Keynesian Synthesis. The model of macroeconomic equilibrium allows for this synthesis, in which aggregate demand and aggregate supply are represented as functions of the tax burden.

Keywords: tax policy, tax burdan, aggregate demand, aggregate supply, fiscal points, Laffer Effect, Laffer-Keynesian Synthesis

JEL Classification: E62, H21, H61