The President’s Dilemma: Demand & Supply Side Policies

How can demand and supply side policies help people like W. Jorgensen?

W. Jorgensen is a businessman who is not very happy due to the decreasing demand of his company’s cars, and is worried about the cost of his labour force. To help someone like him, we can use demand and supply side policies.

For demand side policies, we can do something like “Cash for Clunkers”, where it encourages people to buy eco-friendly cars. By doing something like this, the government will be able to help businessmen such as W. Jorgensen by aiding them with money. The problem that this policy will encounter is that because we know that we cannot increase the government spending (as that will increase debt), we will have to think of a way to reallocate the spending ratios.

On the other hand, if we were to use supply side policies, we should decrease the payment of unemployed workers so that they will not rely so much on the benefits as a unemployed and will be encourage to be employed. Another solution may be to decrease the demand for oil so that the prices will drop.

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2 Responses to The President’s Dilemma: Demand & Supply Side Policies

  1. 12jostma says:

    Strong points you make about demand-side policies, Kanako. I enjoyed your introduction to Mr. Jorgensen, it gives a good context to the problem you are addressing. The supply-side policies are a little shaky, maybe because of a lack in detail. Anyways, good thinking when you say that we need to gain government spending from somewhere; it may have been even better if you had suggested a few ideas.

    In general, great job!!!! 🙂
    Max

  2. cokehat says:

    I liked your mentioning about spending ratios. By using the “cash for clunkers” policy we can allocate some of the spending to the car industry, this can help with some of the problems Jorgensen faces

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