Reagonomics is associated with which economic approach?

• A. Keynesian economics
• B. Supply-side economics
• C. Mercantilism
• D. Socialism

Answer: (B)

The main idea tested here is which economic approach is linked to Reagan’s policy thinking, which is supply-side economics. This view argues that by cutting taxes and reducing regulations, you encourage businesses to invest, expand production, and hire more workers. As supply and output grow, the economy becomes more productive and tax revenues can rise, even if rates are lower, because more activity is happening.

That contrasts with Keynesian economics, which focuses on boosting overall demand through government spending and deficits to pull the economy out of recessions. Mercantilism is an older theory centered on accumulating wealth through trade surpluses and state-controlled commerce, not on using tax cuts to stimulate production. Socialism involves public ownership and centralized planning rather than market-driven incentives to increase supply.

So Reaganomics is best described as supply-side economics: policies aimed at stimulating the economy by increasing the incentives to produce, invest, and grow the economy.