Explain and discuss the advantages and disadvantages of both Keynesian Economic policies and Supply Side Economic policies.
Solution
Discussion 6: Keynesian Economic policies and Supply Side Economic policies.
Advantages and disadvantages of Keynesian Economic Policies and Supply Side Economic policies
The dynamics of Keynesian economics utilize government to alter compounded demand by favoring the increase or decrease of demand and output. The dynamics of supply-side economics tend to increase economic maximization by increasing compounded supply with minimization of taxes.
The good dimension of Keynesian economic policies is it provides the employee’s income to be spent in a cyclical way. He provides the consideration that human beings should minimize their savings and maximize their spending. It can help to increase the marginal propensity to engulf to impact gross employment and economic growth. Despite these good dimensions of Keynesian economic policies, it also has some bad dimensions. Keynesian economic policies provide the consideration that compounding demand does not necessarily equal the productive potential of the dimension of the economy. It provides the enhancement of host factors and it sometimes provides inflation, employment, affecting production, and erratic behavior. Keynesian economic policies relied on the demands for goods and services as the key factors which thrive the economic activity and minimum fluctuations. This knowledge is also called demand-side economics. It is also required to consider that it can induce economic prosperity but increase inflation. In this policy, the output is examined with efficient demand. High consumer spending provides expansion of business dynamics and it also provides better employment options. The higher levels of employment can formulate a multiplier effect that further induces compounding demand and provides maximization of economic progression (Skott, 2019, p.246).
The supply-side economic policies provide good dimensions like incentivizing business dynamics with tax minimization. It provides stimulation of the economy. It can be considered that the supply-side economic policies have different kinds of good dimensions and these are deregulating labor markets, reducing income tax rates, deregulation, privatization, improved trade and balance of payments, improving economic growth, lower unemployment, and lower infraction. The dynamics of supply-side economics support the increasing supply of goods and it provides an economic advantage for the nation. The main objective of supply-side economics is to relinquish the macroeconomic occurrences in a dynamic economy and it provides policies for proportionate circulations. The supply-side policies provide the classification of policies that are formulated to minimize expenses, efficiency improvement, enhance productivity and lubricate international competitiveness. It provides an absence of inflation and economic diversification. Despite these good dimensions of the supply-side economic policies it also has some bad dimensions. The supply-side economics policies emphasize increasing federal deficits and maximizing income inequality. It provides the lowering of taxes which can increase the deficit. The knowledge of supply-side economics provides the consideration that investments in the business dynamics will result in innovation that provides each employee to enhance surplus productivity. It also provides investment growth and productivity enhancement but it cannot impress during the regime of the higher tax period.
Reference
Skott, P. (2019). Autonomous demand, Harrodian instability and the supply side. Metroeconomica, 70(2), 233-246.
