2.6.3 Supply-side Policies ✅

Question 1

What is the distinction between market based and interventionist methods?

Answer 1

Market based i focused on removing obstacles in the free market preventing efficiency/output and increasing incentives.
However interventionist is the government getting involved to increase output.

Question 2

What are the market based policies?

Answer 2

Increase incentive:
- reduce tax (income/corporation).
- lower unemployment benefits to incentivise work.
Promote competition:
- deregulate (encourages market entry).
- privatisation (selling production to private companies who have profit motivation).
- trade liberations (remove tariffs).

Question 3

What are the interventionist policies?

Answer 3

Improve infrastructure:
- increase gov spending/investment.

Reform labour market:
- policies to tackle geographical unemployment (subsidise relocation) overall more flexible workforce.

Improve skills:
- gov spending on education.

Question 4

What are some supply-side policy evaluation points?

Answer 4

• supply policies increase output but decrease price.
• more long-term policies than short-term effects.
• increase value of net exports. (Lower tariffs)
• conflicts.
• gov has to spend more money (possible budget deficit).