Both demand side policy and supply side policy are based on the basics of demand and supply. if it is demand side policy, for example, the interest rate decrease, then the demand of the economy will increase because people will have more money to spend or to invest it. As the definition of demand side policy, it means that "aim to change the aggregate demand in existing economy", and the supply side policy means " aim to change the aggregate supply in existing economy". Although these two are different policies, they are all meant to be about increasing the productivity in our workforce, which is basically mean to lower the barriers for people to produce goods and services. Reducing taxes is one of the way to increase the productivity in workforce. The purpose of the action is to increase the flexibility in our production. I think demand side policy is a better type of policy for me compare to supply side policy. The advantages of the demand side policy including being able to stimulate the economy and increase the aggregate demand, and also being able to control the inflation. The disadvantages of the demand side policy including budget deficits with increased debts and policy legs which reduced spending in a healthy economy and more spending during a weak economy.
No comments:
Post a Comment