The Trickle Down Theory
(Economic)
What is it?
The Trickle Down Theory is an economic theory that focuses on taking care of the "top" and and they will take care of the "bottom". This was one of Calvin Coolidge's strengths. This theory assumes that the successful people in the economy are the business owners, investors, and savers. So when they get tax cuts they use the money to expand their companies by investing in business or put into savings to be able to lend the money. The result is that the theory assumes that they hire more workers for their business and then the workers spend their money driving demand. Which then will lead to a growing economy. Herbert Hoover believed in the Trickle Down theory and this could be a reason why the Great Depression started in America. All of the poor people were suffering and the wealthy was just putting their extra money into the stock market to get more money instead of hiring more workers for their business.
Why is it important?
The Trickle Down Theory is important because it was thought up by the government to promote a growing economy. It usually works because businesses are always wanting to grow and become more powerful so that they can make a bigger profit. When businesses do not use the money to help promote economic growth then there can be a huge dip in the economy and usually will start a recession. The Trickle Down theory could also be important because if businesses do decide to use their money to help the economy then economic growth can be possible. When more people have jobs the economy does happen to do better than when people are unemployed and have no money at all.
Is it progress?
The Trickle Down theory is a progress and it is also not a progress. Depending on the situation where the government used the tactic to tackle the poor economy there can be different results. When the Trickle Down theory was used in history it made history progress because when the wealthy got more money there was usually more people with jobs. If more people have jobs then they get more money, and when people have more money then they are more likely to go out and spend it. Which would result in other companies doing well financially if people were buying their products. In history this has also proven to be a decline. During Herbert Hoover's presidency he relied on the Trickle Down theory to help stabilize the economy. He just used that theory and did not care about was was really happening during the time because the statistics of the idea would show economic growth. However it did not show growth in real life because when the wealthy had more money they invested in the stock market instead of hiring more workers like government intended them to do. So the wealthy people would continue to get more money with the stock market while the poor people continued to become even poorer as they had no jobs and no money. The Trickle Down theory can show to be a progress and a decline in history depending on the kind of atmosphere the population is in.
Leading to...
This theory helped lead to the next era in history known as the Great Depression. When Herbert Hoover relied on the Trickle Down theory he just focused on the statistics of the idea instead of what was really happening to the people around the world. Hoover thought that when the wealthy got more money, then they would hire more workers for their business and then in return make more profit while the poor people with the new jobs started earning money and start crawling out of their economic debt. This did not happen and the Trickle Down theory led to the Great Depression because when the wealthy had more money they invested it into the stock market so that they could earn more money for themselves. This process continued during the era and the rich got richer and the poor got poorer resulting in the Great Depression.
The Trickle Down Theory is an economic theory that focuses on taking care of the "top" and and they will take care of the "bottom". This was one of Calvin Coolidge's strengths. This theory assumes that the successful people in the economy are the business owners, investors, and savers. So when they get tax cuts they use the money to expand their companies by investing in business or put into savings to be able to lend the money. The result is that the theory assumes that they hire more workers for their business and then the workers spend their money driving demand. Which then will lead to a growing economy. Herbert Hoover believed in the Trickle Down theory and this could be a reason why the Great Depression started in America. All of the poor people were suffering and the wealthy was just putting their extra money into the stock market to get more money instead of hiring more workers for their business.
Why is it important?
The Trickle Down Theory is important because it was thought up by the government to promote a growing economy. It usually works because businesses are always wanting to grow and become more powerful so that they can make a bigger profit. When businesses do not use the money to help promote economic growth then there can be a huge dip in the economy and usually will start a recession. The Trickle Down theory could also be important because if businesses do decide to use their money to help the economy then economic growth can be possible. When more people have jobs the economy does happen to do better than when people are unemployed and have no money at all.
Is it progress?
The Trickle Down theory is a progress and it is also not a progress. Depending on the situation where the government used the tactic to tackle the poor economy there can be different results. When the Trickle Down theory was used in history it made history progress because when the wealthy got more money there was usually more people with jobs. If more people have jobs then they get more money, and when people have more money then they are more likely to go out and spend it. Which would result in other companies doing well financially if people were buying their products. In history this has also proven to be a decline. During Herbert Hoover's presidency he relied on the Trickle Down theory to help stabilize the economy. He just used that theory and did not care about was was really happening during the time because the statistics of the idea would show economic growth. However it did not show growth in real life because when the wealthy had more money they invested in the stock market instead of hiring more workers like government intended them to do. So the wealthy people would continue to get more money with the stock market while the poor people continued to become even poorer as they had no jobs and no money. The Trickle Down theory can show to be a progress and a decline in history depending on the kind of atmosphere the population is in.
Leading to...
This theory helped lead to the next era in history known as the Great Depression. When Herbert Hoover relied on the Trickle Down theory he just focused on the statistics of the idea instead of what was really happening to the people around the world. Hoover thought that when the wealthy got more money, then they would hire more workers for their business and then in return make more profit while the poor people with the new jobs started earning money and start crawling out of their economic debt. This did not happen and the Trickle Down theory led to the Great Depression because when the wealthy had more money they invested it into the stock market so that they could earn more money for themselves. This process continued during the era and the rich got richer and the poor got poorer resulting in the Great Depression.