2.6.2 Demand side policies

What is the role of demand side policies

Designed to influence the level of AD

What are the to types of demand side polices

Monetary and Fiscal

How is monetary policy used to manipulate AD

It is controlled by the B of E and they set the base rate (interest) and can undertake quantitive easing projects

How is fiscal ploy used to manipulate AD

it is controlled by the government and the treasury and they can choose to tax and spend at different levels

Show the impact of a successful demand side policy on lifting country out of recession on an AD/AS diagram

Show the effect of successful demand side policies through the trade cycle

The effect of successful demand side polices would be lower peaks and lower slumps and a more stable growth trend

How do successful demand side polices stabilise the overall trend growth

Through discretionary spending by taxing (withdrawal) in a boom and using that money to spend (injection) to boost ad in a recession means that trend growth his stabilised