Designed for high school economics students as a public service project of the American Fletcher National Bank, the booklet examines the "supply-side" philosophy of economics of the Reagan Administration as compared to the "demand-side" emphasis of the past. The manipulation of the nation's economy by raising or lowering government spending may be compared to the turning off and on of a water faucet. The Keynesian theory, which has prevailed since the Roosevelt administration, contends that deficit government spending can stimulate an economy by putting people back to work and creating a demand for new products, thus generating more production and jobs. Due to the tripling of the nation's debt in the 1970's, leading "supply-side" spokesmen under the Reagan Administration have developed the philosophy which attempts to maximize both productivity and government revenues by cutting federal taxes and eliminating unnecessary government spending. This in turn is thought to generate more business activity and productivity. With the exception of prior commitments (interest on the federal debt, government pensions, social security), federal expenditures must be trimmed sharply to offset the expected short-term loss in revenue. Although Americans are among the most lavish spenders and meager savers in the world, taxpayers must save or invest the money they retain from lower tax rates in order for supply-side economics to succeed. (LH)