Journal Topic 13: Supply or Demand?

The demand side policy and the supply side policy are based off of the basics of supply and demand. The demand side policy aims to deal solely with the demand. Take for example, if the interest rates were to be decreased, then the demand in the economy will be increased as people have more money to spend on or invest with. In general, the demand side policy aims to change the aggregate demand in the existing economy. On the other hand, the supply side policy aims to change the aggregate supply in the economy. The policy is all about increasing the productivity in our workforce. This usually means lowering the barriers for people to produce goods and services, such as lowering taxes. This course of action will reduce regulations and allow greater flexibility in our productions. In my perspective, the demand side policy seems to me a much better type of policy over the supply side. Advantages of the demand side policy includes being able to stimulate the economy and increase aggregate demand as well as being able to control inflation with the opposite actions. Disadvantages may include budget deficits with increased debts and policy lags where there is reduced spending in a healthy economy and more spending during a weak one.