The Economic Policies Of Supply Side Economics - 1150 Words

Ever wondered why you have to pay those extra couple of cents at the grocery store? Or why gas prices seem to be constantly fluctuating? The answer lies within a nation’s economic policy. Economic policy is the actions taken by a government to influence its economy. Types of economic policy actions can include setting interest rates through a federal reserve, regulating the level of government expenditures, creating private property rights, and setting tax rates. Economic policy hopes to accomplish economic growth and a stable economy. More specifically, the federal government hopes to accomplish stable prices, economic growth, and full employment by its economic policy. Economists debate over three economic policies: supply-side†¦show more content†¦The methods that supply-side economics uses to improve economic growth are to lower marginal taxes and less government regulation. Under President Ronald Reagan, Congress passed a plan that would slash taxes by $749 billi on over five years. As a result, Reagan was called a great advocate for supply-side economics and was praised for his great leadership. Although supply-side economics is based on the idea of encouraging people to work harder, it also seems to not always work. For example, Congress passed the cut in tax rates after Reagan was elected, but tax revenues did not rise. This goes to show that other economic policies need to be examined in order for the economy to be successful. Demand-side economics is based on the belief that the most important thing affecting economic activity and thus resulting in the most stable economy is consumer demand for goods and services. Also called Keynesian economics, demand-side economics was developed after the Great Depression when supply-side economics fell through. Demand-side economics was founded by John Maynard Keynes and is based on aggregate demand. Aggregate demand is the total level of demand for desired goods and services, which is made up of the sum of consumption expenditure, investment expenditure, government expenditure, and net exports. Demand-side economics utilizes methods such as increasing the buying power of the lower and middle classes, which increases the demand for more goods