9.2 Supply side policies

Question 1

How do supply side policies affect unemployment?

Answer 1

Decreases unemployment due to hiring more factors of production

Question 2

How do supply side policies affect UK competitiveness?

Answer 2

Lower prices means more exports and balance of payments surplus, increased international competitiveness

Question 3

What are free market supply side policies?

Answer 3

Free market supply-side policies are those which aim to make labour and product markets more flexible and efficient by reducing government involvement

Question 4

What are interventionalist supply side policies?

Answer 4

Interventionist supply-side policies are supported by those who believe the government has a key role to play in the efficient operation of markets

Question 5

What does the laffer curve suggest?

Answer 5

Laffer curve suggests that initially as the tax rate is increased, more tax revenue is gained.

However, after point T*, any increase in tax rate causes a fall in tax revenue.