Keynesian Theory vs. Supply Side Essay example - 869 Words

Two very important economic policies that point in different directions of fiscal policy include the Keynesian economics and Supply Side economics. They are opposites on the economic policy field and were introduced in the 20th century, but are known for their influence on the economy in the United States both were being used to try and help the economy during the Great Depression. John Maynard Keynes a British economist was the founder of Keynesian economic theory. Keynesian economics is a form of demand side economics that inspires government action to increase or decrease demand and output. Classical economists had looked at the equilibrium of supply and demand for individuals, but Keynesians focuses on the economy as a whole. Keynesian†¦show more content†¦These taxes were passed from business to business and eventually to the consumer, ending with higher prices. Along with raised taxes for the working class, this effect happened because there was little encouragement to work if more was going to be taxed. Many people were also not willing to put money into savings accounts or stocks because the interest was highly taxed or had a higher interest rate. Supply side economics seemed to have worked each time it was tried throughout the past and was even used by John F. Kennedy. Keynesian’s theory of spending your way out of an issue never really worked and most likely won’t work because it contains negative effects. 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. Keynesian Economics uses a tool called the multiplierShow MoreRelatedEssay about Divisions of The Field of Economics1407 Words   |  6 Pagesneeded capital expenditures using low rate loans, possible because of stimulus monetary policies, to increase market share, or acquire rivals or complementary businesses at reduced prices. Our first objective is to develop an understanding of tools, theories, and techniques used in macroeconomic analysis. These will allow us to understand how to measure economic growth, productivity, and inflation. What is the impact of budgetary and trade deficits on these factors? How do changes in fiscal and monetaryRead MoreSupply-Side Economics: History and Relevance2977 Words   |  12 PagesSupply-Side Economics: Its History and Relevance Today. â€Å"Supply-side economics provided the political and theoretical foundation for a remarkable number of tax cuts in the United States and other countries during the eighties. Supply-side economics stresses the impact of tax rates on the incentives for people to produce and to use resources efficiently.† -James D. Gwartney Introduction The theory of supply-side economics has several labels associated with it, some positive andRead MoreEssay on Government Spending, Deficits, and Keynesian Economics1236 Words   |  5 Pagesinfluencing the demand and supply of money, primarily though the use of interest rates. It also involves unconventional policies such as open market operations. Monetary policy is most widely used for â€Å"fine tuning† the economy. 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