Supply Side Policy Vs Demand-Side Policies

The government implements an economic policy mix involving macroeconomic and microeconomic policy in order to achieve their objectives. The three main objectives include:

The two major approaches to economic policies are the Keynesian and Classical views. Although both of these economic theories have their pro’s and con’s, ultimately, government should opt for the Classical school

There are four main macroeconomic objectives of the government it wishes to achieve in order to maximise the welfare of the society, they are: low and stable inflation, a favourable current account position on the balance of payments, low unemployment and sustained economic growth.

Ans. Adam Smith trusted that in Laissez Faire framework government does not meddle in the activity of the economy and Smith said that economy will accomplish the best useful for the best number however this is just conceivable if everybody takes after self - intrigue. Where Keynes' feelings for private enterprise were comparable as Adam Smith and Keynes said that legislature need to intercede with a specific end goal to leave the monetary droops.

Well I guess you could look at that question as one of the roles of policy. To bring fairness to the economy. Now to jump into chapter twelve; inevitable political debate. There a truly going to be endless and infinite amounts of political debates for as long as we shall live here on this earth.

Supply side economics which centers on increasing overall supply that includes good and services that are produced by increasing availability of land, labor, and capital. Keynesian economics focuses on demand side economics and the multiplier effect. This is considered spending your way out of a recession. Keynes showed that the government could switch roles and become consumers during a recession and spend enough money to kick start the economy again. This is a short term policy meant to be used in a case that the United States is in such deep financial problems it would have to come to this. The main difference between the two is that one is a short tem advantage while the other takes longer.

As a colony of the British, Canada has drastically changed over time as it has gained autonomy and self-government. With this, the country has formed its own system of government, federalism, outlined in the Constitution Act of 1867 (formerly BNA Act 1867). Federalism is a form of government in which power from the Constitution is equally distributed between the federal and provincial authorities. This entailed that issues regarding national or international affairs would fall under federal jurisdiction, while local or provincial matters would fall under provincial jurisdiction. Although considered, Unitary and Confederal government systems were ultimately omitted as sovereignty would have resided with a central government and member states,

Suppose economists agree that the country has recently entered a recession. Identify one supply-side and one demand-side strategy to help the economy, and explain why it would be used.

Keynesianism and monetarism are both ways to stabilize the economy and promote growth when need. In keynesianism, government uses fiscal policy which is a list of policies that government spending and taxing can be used to improve the performance of an economy. The government produces stabilization by taxing and

     With America in recovery from the attacks on our freedom and our economy, many wonder if we will return to phase one (expansion) and how long it will take to reach phase two (recession) again. The Keynesian Theorists of America believe that the government should actively pursue Monetary policies (enacted by the Federal Reserve Bank) and Fiscal policies (enacted by Congress) to reach adjustments to price, employment, and growth levels. In our full market economy, we must use these economic policies to control aggregate demand. When these policies are used to stimulate the economy during a recession, it is said that the government is pursuing expansionary economic policies.

Supply-side policies are made of several important points to regulate the economy. Supply-side policies consist of stimulating the economy by production, cutting taxes, and limiting government regulations to increase incentives for businesses and individuals. Businesses then would invest more and expand to create jobs for people who would save and spend more money. Thus, increased investment and productivity would lead to increased output in the economy. With this increased output the economy grows and unemployment goes down. Yet, this would not be the only policy to bring the economy out of a recession.

Usually this goal is "macroeconomic stability" - low unemployment, low inflation, economic growth, and a balance of external payments. Monetary policy is usually administered by a Government appointed "Central Bank", the Bank of Canada and the Federal Reserve Bank

| Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe that policy can manage aggregate demand, and thereby, production and employment, to offset the inherent instability. When aggregate demand is inadequate to ensure full employment, policymakers should boost government spending, cut taxes, and expand money supply. However, when aggregate demand is excessive, risking higher inflation, policymakers should cut government spending, raise taxes, and reduce the money supply. Such policy actions put

Keynesian economics was followed during the consensus. Keynesian economics was extremely hands on and involved major government interference. It is described as demand management, the government would have control over taxes and interest rates to increase or decrease demand. The state was attempting to control unemployment and inflation. These Keynesian policies led to economic stagflation when not in balance, and this occurred in the 1970’s. Stagflation is the tradeoff between unemployment and inflation. When unemployment is low there becomes too much demand, and inflation increases. However, when unemployment is high, inflation decreases, but the government still has to deal with the issue of high unemployment. After the 1970’s, unemployment was up, and it appeared that the forces that cause inflation were rising. This economic

It widely recognized that the monetary policy within a country should be primarily concerned with the pursuit of price stability. However, it is still not clear how this objective can be achieved most effectively. This debate remains unsettled, but an increasing number of countries have adopted inflation targeting as their monetary policy framework. (Dr E J van der Merwe, 2002) This topic of Inflation targeting is a subject which immediately conjures different perceptions from different people. Many feel that low inflation should be a main aim of monetary policy, while others (such as trade union activists) believe that a higher growth rate to stimulate jobs should be the main concern.