Topic 13: Supply or Demand?

I prefer the government to intervene and stabilize the economy by using Demand-side policies.  Demand-side policy focuses on government intervention to shift aggregate demand in or out depending on whether unemployment or inflation is the most pressing issue. The government can adjust the aggregate demand by either change the tax rate or changing government spending. I think using demand-side policy is more effective in keeping the economy stable because what matters the most is what’s the consumers thinking about (since they are the ones who pay the money). Government can decrease the tax rate in order to increase the demand for purchasing. The government can also increase its spending to stimulate the demanding. For example, in the 1930s depression, President Roosevelt increased the government spending for constructing infrastructure thus provides job opportunities for civilians. In the end, it showed that it did work. Meanwhile, demand-side policies have their weakness: time lags. Demand-side policies are useful for getting out of a recession, but by the time the government is able to determine where the country's economy is located, it is too late to fix things. Congress is too slow to act. Government policies often come too late and it can cause inflation.