24 : Suply Side Piloolicies

Question 1

What are supply side policies

Answer 1

• policies designed to increase the productive capacity of the economy shifting LRAS to the right

(They are supposed to shift the LRAS curve to the right if successful)

Question 2

What kind of supply side policies are there

Answer 2

• Interventionist

• Market based

• Free market

Question 3

What are interventionist supply side policies

Answer 3

The government promoting policies that aim to shift LRAS to the right by increasing the economy’s productive potential

Question 4

List a few interventionist supply side policies

Answer 4

• government spending on education : big spend on apperenticeship schemes indat refrain in and school curriculum reform. If successful this will improve skills and productivity,

• government spending on infrastructure : e.g. Spending on transports , improving road ,airports ,runways. This reduces costs of production for firms as transporting goods will become easier and more efficient

(If successful LRAS will shift to the right)

Question 5

What are market based supply side policies

Answer 5

Policies reducing the role of government that aim to shift LRAS to the right be increasing the economy’s productive potential

Question 6

List a few market based policies

Answer 6

• Tax reform : reducing taxes e.g. Income tax. Because lower income tax will increase the incentive to work since less money is taxed away

• Labour market reform : reducing power of trade unions. this reduames the costs for production because trade unions ask for higher wages

• Reducing unemployment benefits : forces people he start working which will increase the quantity of labour and shift LRAS to the right