1. Demand side v. Supply side
Fiscal Policy
Demand side v. Supply side

2. Demand Side Economics Keynesian Economics GDP=C+I+G+NX
Advocating the necessity of temporary federal deficits.

3. Supply Side Economics “Reaganomics”— 1980s
Intended to stimulate output and lower unemployment by increasing production rather than demand
Deregulation
Decrease taxes and reduce safety net

4. Supply Side Policies Demand Side Policies
Stimulate production (supply) to spur output
Cut taxes and government regulations to increase incentives for businesses and individuals
Businesses invest and expand, creating jobs; people work, save, and spend more
Increasing investment and productivity lead to increased output
With output increasing, the economy grows and unemployment goes down
Stimulate consumption of goods and services (demand) to spur output
Cut taxes or increase federal spending to put money into people’s hands
With more money, people buy more
Businesses increase output to meet growing demand
With output increasing, the economy grows and unemployment goes down