Demand-side economics

Definition

Demand-side economics is an economic theory that focuses on stimulating economic growth through policies aimed at increasing consumer spending. It suggests that by putting money in the hands of consumers through measures like government spending or tax cuts for lower-income individuals, aggregate demand for goods and services will increase, leading to overall economic expansion.

Related terms

Keynesian economics: This term refers to the economic theory developed by economist John Maynard Keynes. It emphasizes the importance of government intervention in stabilizing the economy through fiscal policies like government spending during times of recession or depression.

Multiplier effect: The multiplier effect represents how an initial increase in spending can lead to a larger overall impact on economic output. For example, when the government spends money on infrastructure projects, it not only creates jobs but also stimulates demand for goods and services from other sectors of the economy.

Fiscal policy: Fiscal policy refers to government decisions regarding taxation and spending aimed at influencing the overall state of the economy. It involves measures such as adjusting tax rates or implementing public spending programs.