One of the most influential economists of 20th century Believed only the government is large enough to offset changes in investment spending John Maynard Keynes the face of Demand Side A change in investment spending will have a magnified effect on total spending ID: 597729
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Supply-Side vs. Demand Side EconomicsSlide2
One of the most influential economists of 20’th century.
Believed only the government is large enough to offset changes in investment spending.
John Maynard Keynes the face of Demand -SideSlide3
A change in investment spending will have a magnified effect on total spending
When a change in investment spending is caused by a change in overall spending, a downward economic spiral may begin
Investment spending is a multiplier..about 2 today. -I=S(2)
Demand-Side PoliciesSlide4
Unemployment insurance and federal entitlement programs work to stabilize the economy.
In the long run, all attempts by the government to increase aggregate demand increase the price level without increasing the real GDP.
Demand-sideSlide5
Faces of supply-side Slide6
Hopes that reducing tax rates would increase tax collections…. failed
to increase savings in
the 80’s. (trickle down,
Reganomics and Laffer Curvep pg. 459-460.)Successful policies can shift the Ag. Supply and move the economy into equilibrium.Seek to promote economic growth rather than economic stability.
Supply-Side PoliciesSlide7
Monetary Policies
Monetarists believe that $ supply should be allowed to grow slow but steady to control inflation and promote growth.
Monetarists believe that expanding the money supply cannot permanently affect the rate of employment.Slide8
Discretionary fiscal policy is used less today than it once was……except for at the moment. (did you hear about the GM payback?)
Automatic stabilizers and progressive income tax work together to stabilize the American Economy.
Declining discretionary policy has increased the influence of monetary policy.
Most members of Congress believe the power to create money should remain with an independent agency, not elected officials.
Changing Nature of Economic PolicySlide9
Economists choose policies that reflect their sense of economic problems and their importance
Economists are affected by economic conditions prevailing in their life-times.
Ex. Hyperinflation or Great Depression vs. Stagflation
Why Economists DifferSlide10
The Council of Economic Advisers advises the president of the US on economic policy.
Economists have contributed a great deal to the understanding of economic activity. They hope to prevent another Great Depression, stimulate growth, and help disadvantaged groups.
However, they can not help a country avoid recessions. Will
we every know how close we were to a depression? Economic Politics