Obama believes more unemployment benefits will stimulate the aggregate demand, but he should know that more unemployment benefit will encourage more those who are unemployed stay at home, rather than go out looking for a job. Also it is true that more government spending will lead to higher taxes. Higher taxes will increase the costs for the suppliers, and slow down their sales, and lower the incentive for the suppliers to produce more products. Therefore, Obama's way of stimulate demand will not satisfied with sufficient supply. The result will be higher product price, and inflation is unavoidable.
Republicans believes in stimulating aggregate supply will solve the problem. They strongly support tax cut. More tax cut will encourage the businesses to hire more people, and increased more supply to the market. For American consumers, lower taxes means more money left in their pockets, and therefore, they will spend more. More demand together with more supply, problem will be sovled!
