4.4.3 supply side policies

Question 1

What do supply side policies aim to do?

Answer 1

Improve the long run productive potential of the economy.

Question 2

What is the difference between market based policies and interventionist policies?

Answer 2

Market based policies limit intervention of government and allow the free market to eliminate imbalances. Forces of supply and demand are used.

Interventionist policies rely on the government intervening in the market.

Question 3

What are some free market supply-side policies? [3]

Answer 3

• Increase incentives
• Promote competition
• Reform the labour market

Question 4

How could reducing National Minimum Wage be used as a supply side policy in a free market?

Answer 4

Reducing it will allow free market forces to allocate wages and the labour market should clear, making the labour market more efficient.

Question 5

What are some interventionist supply side policies? [4]

Answer 5

• Promote competition
• Reform the labour market
• Improve skills and quality of labour force
• Improve infrastructure