Trickle-up effect

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The trickle-up effect or fountain effect is an economic theory used to describe the overall aggregate demand of households and middle-class people to drive and support the economy. The theory was founded by John Maynard Keynes (1883-1946).[1] It is sometimes referred as Keynesian economics in which stimulation is enhanced when the government lowers taxes on the middle class and increases government spending.[2]

Relationship to the trickle-down effect[edit]

Trickle-down economics is a rhetorical term used to criticise free market economics. No economist has ever supported trickle-down economics, which is the idea that giving the wealthy tax breaks will encourage them to spend more, and so this wealth will "trickle down" to the less wealthy.[3] In fact, free-market economics suggests that additional wealth will be created if businesses are less hampered by government controls or high taxation.[3]

The trickle-up effect states that benefiting the poor directly (for example through micro loans) will boost the productivity of society as a whole and thus those benefits will, in effect, "trickle up" to benefits for the wealthy.[4]


See also[edit]