Question

3. Supply-side economics vs. demand-side economics and their political affinities.

Answer 1

SUPPLY SIDE ECONOMICS

-This economic theory states that economic growth is best encouraged through policies that lower barriers on production,the economy grows when the supply grows.Supply side economics is the type of economic theory espoused by Ronald Reagan and most in the Republican party. Supply side theory of economics aims at increasing the supply of goods and services which are available to the consumers. The concept behind supply side economics is that if you keep corporate taxes down then businesses will have more money to spend on research and development of new products and services. The wider the variety of offered products and services the more apt consumers will find something that they think they need or want. Apple's I-series products are examples of creating new demand by producing an innovative supply of new goods and services. The greatest danger of supply side economic theory is long-term deficits which will weigh heavily on the future economy.

DEMAND SIDE ECONOMICS

Demand side economics is all about increasing demand in the consumer. This has been referred to as Keynesian economics. The idea here is that the quickest way to increase the  demand is to increase the relative wealth of the people who want to make purchases. This theory is mostly espoused by liberal Democrats who want to redistribute wealth by taking extra income taxes from corporations and the rich in order to redistribute it to the middle class and poor. Two ways to increase demand are to create jobs and raise minimum wages. Tax rebates and tax cuts are two other ways to increase discretionary funds to drive consumer spending. One danger of too much consumer demand is inflation.

Republicans are prone towards supply side economics or Reaganomics. On the other hand Democrats seem to want to balance the purchasing power by driving demand through raises in minimum wage and other government stimulus instruments and legislation