You Will Never Believe These Bizarre Truths Behind Supply Side Economics | supply side economics

Supply-side economies are economic theories arguing that economies can be developed by reducing regulation and lowering tax, by which it's directly against demand-side economy theory. Demand-siders see growth as a result of demand and supply of product and services, and demand-siders view supply-siders as lacking the right tools to understand the market, so supply-siders often ignore supply-side economies.

Some supply-siders view supply-side economies as ineffective and wasteful, as in the case of the “supply side” theory behind government intervention (such as welfare programs or even the United States Postal Service), which they view as inefficient and unproductive. Supply-siders also criticize supply-sider theories, such as Keynesian economics. These views often come from the right-wing fringe or as part of a conspiracy theory.

Supply-siders believe that taxes on businesses and individuals will only increase unemployment, which will cause the business owner to cut back on spending and thus increase unemployment. They also argue that increasing demand and increasing employment and income equal decreasing prices. For example, if you increase your spending to reduce a price, then the price of your item goes down in line with increased demand. But supply-side theorists argue that there are other factors affecting the price, such as demand and supply. The supply of some goods may be limited, and so a greater amount of a certain good is produced in order to meet demand, but this does not mean that the item is cheaper. As a result, supply-siders argue that tax cuts for a business and an individual do more harm than good.

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Supply-siders also argue that a higher amount of spending will lower the price of products and services and therefore increase consumption and employment, because if businesses have more money to spend, then they can invest it and increase the size of their capital stock, which in turn increases productivity. This also leads to the “trickle down” theory. So if the business owner is given more money, he may invest in more equipment, buildings, or capital equipment, and pass the money along to workers or consumers.

Supply side theorists have also been criticized for their reductionist approach to policy. Because they don't consider the effect of tax policy and regulation on the price of goods and services, they argue that because prices have been falling for several years, the government needs not worry about raising taxes to reduce the prices, because in the long run the economy will be benefiting.

Supply side economics does have its critics. Some economists think it may not be as efficient as demand-based economics, or at least it lacks a broader theoretical basis than supply-side economics, and thus, they don't see how supply-siders could change the way that people respond to changes in supply.

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