2.3 Whiteboard Tasks Flashcards
Define Aggregate Supply
Supply of all finished goods and services in an economy. Shows the level of GDP produced in an economy.
What’s the difference between Actual GDP and Potential GDP?
Actual GDP- This is the actual amount of GDP that is being produced in the UK (Y1)
Potential GDP- All factors of production working at full potential 40 hours a week (Yp)
What are the factors impacting Short-Run AS?
Costs of Production (Commodities, Wages + Raw Materials)
What’s the impact of increased oil prices on AS?
Increasing price of oil will shift AS up. Cost of Production has increased causing an increase in the price level.
What are the factors impacting LRAS?
Factors of Production (CELL)
Capital
Enterprise
Land
Labour
What is the difference between market-based policies and Interventionist policies? (and examples)
Market-Based Policies- Aim to reduce gov intervention and allow free market to operate efficiently. E.g. Privatization, deregulation and lower income tax rates.
Interventionist Policies- Involve active government involvement in the market to address issues such as market failure.
Is cutting corporation Tax Market-Based or Interventionist?
Market-Based
Is deregulation Market-Based or Interventionist?
Market-Based
Is improved roads Market-Based or Interventionist?
Interventionist
What are the advantages of Supply-side policies?
-Increased potential GDP
-Economic Growth without inflationary pressure
-International Competitiveness
-Green Growth
-Increased Labour Mobility
What are the disadvantages of Supply-side policies
-Time lags
-Expensive (can cost billions)
-Uncertainty (no guarantees it will improve skills)
-Depends on starting position
-Income Inequality
What are Supply-side policies?
Supply-side economics aims to bolster an economy by implementing policies that will lead to an increased supply of goods and services and subsequent economic growth
