Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Economics Supply side Keynes Supply side Keynes A President is measured by how well the economy did during his term in office. More specifically is whether unemployment went up or down, and did they help the economy to fight inflation. Two basic modes of thought on the subject have pervaded public policy since World War II: demand-side and supply-side economics. Demand-side economics is generally known as Keynesianism, named after the English economist John Maynard Keynes. He believed that governments should force interest rates down by printing money and lending it from the central bank at a discount. This would put more money in consumers' hands and encourage them to spend and consume more, thus creating an incentive for investment. This helped to solve some of the problems, but in the long run it is extremely inflationary, because with the increase of the money supply it becomes devalued. Keynesianism also calls for the government to spend more to try to help the economy grow. Keynesianism is a short-term solution to an economic problem and could only do so much for the economy before inflation caches up with it, and takes it into a recession. On the other hand we have supply side economics, which works on more of a long-term basis. It basically attempts to stimulate economic growth, which would reduce inflation, and raise the standard of living. Supply side proponents say that by reducing government regulations and taxation, this will stimulate more economic growth, and market equilibrium will be reached on it’s own, without government impositions.(pg 338 Mings, Marlin) Keynesianism was popular until the late 1970’s during a period of ‘stagflation’, where both unemployment and inflation were rising together.(pg 339 Mings, Marlin) Policymakers realized that they could not solve this problem with Keynesian ways of thought. When Reagan came into his Presidency he was faced with an economy that was in recession; the prime interest rate was 15½ percent, the unemployment rate was over 7 percent and inflation was running close to 14 percent a year. Reagan and his advisors took a conservative approach to solving the problem and looked to supply-side, or ‘trickle down’ economics to accomplish their goal of bringing the country out of this recession and stimulating new growth. The economic policy of this time was known as ‘Reaganomics’, and it emphasized using monetary policy to combat inflation, and lower marginal tax rates to restore the reward for work, saving and investing and to boost productivity and growth. Many demand side advocates predicted that this would only increase inflation, unemployment, and lead to a general decline in the economy. Contrary to these predictions the economy recovered at a rate even faster than the Reagan administration had predicted. The major problem with the policy at this time was that the congress was still led by demand-side liberals. They said that these tax-cuts would produce a budget surplus and instead of using this surplus to offset the revenue loss from taxes, they just increased their spending, which caused the national debt to increase from one to four trillion dollars from 1981 to 1986. Another problem with this supply side ideology was that it was seen as giving the rich more of an advantage, because they were getting more of a tax break than less wealthy peoples. However this was the whole point of the trickle down idea. If you can increase the benefits to the people at the top then those benefits should trickle down to the lower classes, and stimulate economic growth throughout the economy. Today, the economy is in a recession, George W. Bush looks to be doing a good job to stimulate the economy. But only time will tell. Although the policies that have got us to this point in history have changed from one side of the spectrum to the other. Economic theories completely override the one previous to it. They continue to change along with an ever changing government. Bibliography: The Study of economics, Turley Mings - Matthew Marlin Word Count: 649
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