Question

Supply side economists have a different viewpoint from Keynesian economists about how tax policy can impact various economic variables. What are your thoughts on the differences between these two schools of thought? Which viewpoint do you think is a more accurate reflection of how the economy actually works?

Answer 1

Keynesian economist’s views that consumers and their demand for item and services are key economic variables, and on the other hand the supply side economists view that producers and their willingness for creating the items and services set the pace of growth in economy. Keynesian economists believe in promoting the growth with the government deficit spending. Supply-side economists states that economic growth can be promoted with tax policy, fiscal policy, and regulatory policy.

In my opinion supply side economists more accurately provide a reflection on the actual working of an economy. The supply-side fiscal policy is not limited in scope and basis can be any number of variables. The supply-side economic theory seeks to identify variables that cause an increase in the supply and subsequently growth in an economy. These policies assist to decrease the inflationary pressure in the long term due to the productivity and efficiency gains in the goods and labour markets. It also creates real jobs and sustainable achievement through their positive impact on the productivity of labour and competitiveness.