2.6.3 Supply side policies

Question 1

What are supply side policies

Answer 1

Government policies that attempt to alter the level of aggregate supply directly, e.g aims to increase productivity of resources in an economy

Question 2

What is the neo-liberal, classical view, market based approach to supply side policies

Answer 2

• gov should reduce spending and taxation and power of trade unions (no intervention) to increase supply

Question 3

What is the interventionist (keynesian) approach to supply side policies

Answer 3

-use of state investment to correct market failures, reform public services, use tax incentives and strong regional policies to boost supply

Question 4

What are the aims of labour market policies

Answer 4

-increase incentives to work
-improve occupational mobility of labour
-improve geographical mobility of labour
-labour market flexibility

Question 5

What are the labour market policies

Answer 5

-reducing income tax
-increasing tax free allowance
-benefit reform/tightening rules
-incresing minimum wage
-spending on education and training
-spending on infrastructure
-job vacancy info schemes
-reducing trade unuion power
-reform labour laws e.g 0 hour contracts

Question 6

What are the aims of product market policies

Answer 6

-stimulate investment and development
-business efficiency
-encourage new business start ups

Question 7

What are the product market examples

Answer 7

-reducing corporation tax
-subsidies or tax relief on resources and development
-spending on infrastructure
-reform labour market
-privatisation for competitiveness
-business support

Question 8

what is the importance of supply side policies on the economy

Answer 8

-platform for long term growth
-productivity leads to better living standards
-allows growth without inflation
-makes the UK more competitive in a global market
-tax revenues fund spending

Question 9

Problems with supply side policies

Answer 9

-opportunity cost of gov spending elsewhere
-tax cuts may cause budget deficit
-labour mobility leads to job insecurity, stress and low productivity
-may not be impactful with weak AD
-time lags
-expensive to implement
-changes to taxes and benefits may cause inequalities
-many fails of supply side privatisation e.g railways