Financial Glossary: Trickle Down Theory


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Trickle Down Theory

Trickle Down Theory

An economic theory, according to which investing money in companies and giving them Tax breaks is the best way to stimulate the economy.

Proponents of this theory believe that when government helps companies, they Will produce more and thereby hire more people and raise salaries. The people, in turn, Will have more money to spend in the economy. "Trickle-down Economics" and "trickle-down theory," is a term used in political rhetoric to classify economic policies perceived to benefit the wealthy and then "trickle-down" to the middle and lower classes.

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