Question

1. Discuss Supply Side Economics Model.
2. Make a case against this model.

Answer 1

Answer) The doctrine of supply side economics was out forth by Adam Smith, David ricardo, and says. The idea of supply side economics can be characterised as per Say's law of supplying creating it's own demand. Other assumption of supply side economics are:

1. There is always full employment.
2. Unemployment never exist in reality.
3. The price are completely flexible in nature.
4. Velocity of money is constant.
5. No need of government intervention as the invisible hand governs the market forces.
6. Money is non neutral in nature.

However J.M. Keynes refuted the idea prophesed by the classical economics. Keynes advocated that economics should be witnessed from the demand side. In such situations like unemployment is possible. As a result government intervention is vital to correct the disequilibrium. The prices are rigid in nature due to existence of pre existing wage contracts.