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AP U.S. Government: Public Policy Drill 2, Problem 1. According to supply-side economics...what?

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Transcript

00:00

Thank you Wait And here's your shmoop douceur brought to

00:05

you by government stimulus a poke in the side for

00:08

lawmakers asleep on the job Wake up dude Come on

00:12

according to supply side economics what and hear the potential

00:17

answers wait so quick e con recap in the marketplace

00:27

we often talk about the demand for goods and the

00:29

supply of goods That's all you're ever gonna remember from

00:32

your high school of course in terms of demand well

00:36

we have want here or demands to buy things like

00:39

let's say pizza if all of a sudden there's a

00:42

crazy new diet fad claiming that pizza is the miracle

00:45

health food we'll demand for pizza would go up if

00:49

there's a report claiming pizza was the number one cause

00:51

of food related deaths while demand would probably go down

00:55

then we've got restaurants and food companies who then supply

00:58

those pizzas to us If cheese suddenly became way cheaper

01:02

production costs would go down and the supply would likely

01:06

increase if government decided to increase taxes on pizza manufacturers

01:11

well they'd have less money to spend on producing the

01:14

pizzas though the supply would decrease the same idea could

01:17

be applied to the political economy governments can either try

01:20

to help the economy by increasing demand or they can

01:23

try to improve things by increasing supply That last one

01:28

is what we mean when we say supply side economics

01:31

thinking according to supply side economics should a supply never

01:36

exceed demand Well actually supply side economics is all about

01:40

getting businesses toe produced maur If supply were to increase

01:44

and demand stayed the same we'd simply see an increase

01:47

in quantity and a decrease in price That's what supply

01:51

side economists are going for a new supply side economists

01:55

think be government stimulus efforts should aim it increasing consumption

01:59

in order to soak up excess supply Well remember how

02:02

we said that governments could help the economy by increasing

02:05

demand Well that's what government stimulus efforts are designed to

02:08

dio by increasing government spending lawmakers put more cash money

02:12

in the pockets of consumers which can increase demand in

02:15

the market place they'll be isn't really supplying us with

02:18

the right stuff would supply side economists argue that dee

02:21

the government should not intervene in the economy Well those

02:25

supply side economist tend to fall on the conservative side

02:28

of the political spectrum they aren't arguing for a complete

02:31

ban on government intervention It's more about using a different

02:34

set of tools What about e that suppliers of natural

02:38

resource is should increase their conservation efforts What on earth

02:42

are they talking about here it's the economy not environmental

02:45

law which means that supply side economists believe see government

02:49

stimulus should aim it expanding production by reducing taxes on

02:54

businesses Plaza supply side is really just a fancy name

02:59

for low tax economics The idea is that reducing taxes

03:03

especially on businesses and the wealthy would incentivize investment in

03:08

production which would boost supply in the marketplace So c

03:12

is the right answer though There's A lot of disagreement

03:14

in washington over whether or not supply side economics actually

03:18

produces its intended effect It's pretty easy to graph the

03:21

connection between tax policy discussions and overall sleeping Uh yeah

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