5) Introducing Supply Side Policies - MMT

Question 1

what are the governments 5 main macroeconomic objectives?

Answer 1

economic growth, stable prices, low employment, stable balance of payments and fairer distribution of income

Question 2

what is supply side policy used for?

Answer 2

governments attempts to increase productivity and shift aggregate supply (AS) to the right

Question 3

what do supply side policies mainly target?

Answer 3

LRAS but there may be short term impacts as well

Question 4

what two types of supply side policy are there?

Answer 4

1) Free Market Policies
2) Interventionist policies

Question 5

what do free market supply side policies involve?

Answer 5

policies to increase competitiveness and competition

Question 6

what are examples of free market supply side policies?

Answer 6

privatisation, deregulation, lower income tax rates, and reduced power of trade unions

Question 7

what do interventionist supply side policies involve?

Answer 7

involve government intervention to overcome market failure.

Question 8

what are examples of interventionist supply side policies?

Answer 8

higher government spending on transport and communication, on education and training etc

Question 9

free market: what is privatisation?

Answer 9

selling state owned assets to the private sector

Question 10

free market: what is deregulation?

Answer 10

reducing barriers to entry to encourage new firms to enter the market

Question 11

free market: what is reform of tax and benefit system?

Answer 11

reducing the tax burden on the companies. Making state benefits more efficient

Question 12

free market: what is competition policy？

Answer 12

ensuring that competition began between businesses is fair; minimising barriers to entry in different markets

Question 13

free market: what is improving labour market flexibility?

Answer 13

making it easier for businesses to hire (and fire) workers when they need to

Question 14

what are the 5 free market policies?

Answer 14

1) Privatisation
2) Deregulation
3) Reform of tax and benefit system
4) competition policy
5) improve labour market flexibility

Question 15

interventionist: what are subsidies?

Answer 15

payments made by the government to businesses, as an incentive to do something

Question 16

interventionist: what is investment in infrastructure?

Answer 16

improving the country’s long term and essential manmade environment

Question 17

interventionist: what is investment in education and training?

Answer 17

improving the quantity but especially quality of workers available for firms to hire

Question 18

interventionist: what is investment in R&D?

Answer 18

helping businesses to innovate i.e develop new products, new technology

Question 19

interventionist: what is immigration control?

Answer 19

influencing the number of foreign nationals competing for jobs in the UK

Question 20

would there be an intention to shift AS to the left?

Answer 20

unlike AD, there is rarely if ever any intention from the government to shift AS left. Supply- side policies are almost always expansionary

Question 21

what does higher AS mean?

Answer 21

higher AS, especially LRAS, should (in theory) mean higher growth, more employment and lower price level, all desirable objectives

Question 22

what will supply side policies do for the economy?

Answer 22

will improve the quantity and quality of all the 4 factors of production (resources) available in the economy, but often does not have their desired effect

Question 23

what are SSPs one overriding objective?

Answer 23

to shift LRAS to the right