The question of interest rates
So far in this exploration interest rates and fiscal policy were only referred to in the context of M reduction to reduce demand and whether or not the economy returns to an equilibrium position. So far the response to this assertion is to look at the QTM and show there are no "corrective functions" there to explain why the economy would return to some equilibrium. This assertion conveys the impression that an undefined "equilibrium" represents an advantageous state of affairs.
This is an interesting topic but not one to be addressed inthis presentation.
The evolving state of the UK economy, for example cannot be described as one of equlibrium but rather as a disequilibrium marked by rising prices and declining real incomes. This has raised propositions from monetarists including the Bank of England's intention to continue to raise interest rates to attempt to reduce inflation. This has the same effect as draining funds from the supply side as a result of the disincentive to invest and decline in real incomes of people and companies paying off loans and mortgages.
The question of fiscal policy
Similarly combining this with the lower marginal taxes in the upper bands will have a contrary impact. However, based on most previous examples of this tactic of combining rising interest rates with lower marginal tax ratessupply side economics) , deployed in the UK and the USA, in the 1980s, the result was an economic depression, a rise in unemployment and a significant increase in income disparity and a marginal impact on inflation.
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