What's the difference between supply-side economics and Keynesian economics?

Answer 1

Supply side economics, which originally was called classical economics, observes that in a competitive market, assuming a competitive market for capital, then production should continue until the marginal product of labor equals the real wage. As such, the optimal level of production is vertical. So demand impacts price but not production quantity. In fact, nothing on the demand side can impact national income, except to the extent it alters price.

Keynesian economics implies that some variables, generally either wages or prices can become nominally sticky. It is important to note that if real wages become sticky, production reverts to the supply side system again. If one of these demand side variables become nominally sticky, then optimal production no longer becomes possible. In fact, if wages are nominally sticky, then you get an upward sloping demand curve. Because of this, demand side issues can determine national income. If the government chose to purchase an additional $50,000 worth of material, then some multiple of $50,000 could be added to national income.

Answer 2

Keynesian economics is where the government spends extra money to spur economic growth and thus receives a multiplying effect. Supply side is where there is no extra government money inserted into the economy.

Answer 3

call for area concept is heavily on the topic of the artwork of Keynes who believed that if the government fed money into customers, they could call for extra products, forcing or encouraging the providers to construct extra products. the thank you to try this has been to print extra money or cut back taxes to the buyer classification (the working classification). the thank you to unfold this revealed money to the right human beings has in no way been sparkling. the present tries in this regard have been to feed extra money to banks in the wish it may filter out right down to the suitable human beings. the dimensions of bonuses in the financial section coach that the money didn’t get to the suitable place. furnish area concept, generally linked with Reagan, theorized that if the manufacturers might desire to be inspired to construct extra products, then the buyer could purchase. nevertheless Reagan pushed for decrease tax costs for all of us, the pundits argued that it grow to be the wealthy that benefited the main, the wealthy being the provision area. A logical argument on the provision area is that if taxes have been decrease on the manufacturers, they could decrease their costs. this could in turn enable customers to purchase extra of the product at those decrease costs, encouraging providers to produce extra product, decreasing costs and costs much extra. on the different hand, with call for area concept, if the buyer is given extra money to purchase, that too could bring about extra production which might further cut back costs and costs.