Aggregate Supply Policies Flashcards
Aggregate supply policies
- are government strategies
- that seek to create more favourable/sustainable supply side conditions for firms that produce G and S
- these measures help reduce Aus production costs,
- increase efficiency
- provide better incentives
- imporve resource access
- and expand productive capacity and sustainable GDP level
- growing the AS line
what are some aggregate supply policies?
- immigration policy
- microeconomic reform policy
- supply side aspects of budgetary policy
- environmental policies
Microeconomic reforms
are one branch of AS policy involving government cost-cutting, efficiency promoting measures that grow productive capacity
Immigration policy
key aspect of AS policy that aim to manage the number and composition of migrants to best support future economic growth
Supply-side aspects of budgetary policy
the aspects in the annual budget such as spending on infrastructure projects, lower tax rates and welfare reforms that help to lift efficiency and build a nations productive capacity
environmental policies
government measures that seek to alleviate environmental problems and promote sustainable environmental outcomes by altering the decisions made by households and businesses about their economic activities
general aims of AS policies
seek to make supply side conditions more favourable for producers of G and S.
And pursue 5 other eco goals and living standards
aims of AS policy:
boost eco growth sustainability through increased efficiency
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allocative efficiency
about ensuring that resources are used in ways that maximise the satisfaction of societies needs and wants by allocating them through strongly competitive markets
Comparative cost advantage
the principle that a nation should specialise in those areas of production in which it has the greatest cost advantage or least cost advantage
Productive/technical efficiency
about businesses using least-cost methods to produce G and S most efficiently
Dynamic efficiency
involves firms being adaptive and creative in response to changing economic circumstances, in the ways they use resources
Intertemporal efficiency
ensuring there is is a suitable balance between resources being allocated towards current consumption on the one hand and, on the other, adequate national saving for financing future investment
aims of AS policy:
Promoting low inflation by cutting production costs
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aims of AS policy:
promote external stability by increasing our international competitiveness
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aims of AS policy:
promoting full employment especially in the long run, through better efficiency
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aims of AS policy:
promoting an equitable income distribution through increased efficiency
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successful microeconomic reform effects
increased efficiency:
- shifts AS to the right, growing GDP, employment, real incomes and cost inflation.
- Prices fall
- better international competitiveness
Trade liberalisation
involves the progressive reduction of tariffs, subsidies and import quotas, and a shift towards the idea of Free Trade where there is an increase in the number of bilateral free trade agreements.
Microeconomic reforms
- trade liberalisation
- Labour market reforms
- deregulation of key markets
Globalisation
the spread of business and international trade across national boards as if there was only one large market.
FTA
Free Trade agreements :
bilateral trade agreements between two or more countries where tariffs, subsidies and quotas and restrictions on the free flow of money capital are removed
Budget outlays on Infrastructure to grow aggregate supply
- increases efficiency of resources
- improve international competitiveness
- improve profitability of Aus businesses for growing jobs
- grow productive capacity
- bost eco growth
- improve living standards
economic infrastructure
provision of capital equipment, e.g. road, railways, telecommunications and water supply, often y governments, that is mainly used collectively by firms to produce other G and S
Social infrastructure
focuses on the provision of collective community services, e.g. education and health
features of the immigration policy
made up of:
- skilled migrant stream
- family migrant stream
- humanitarian migrant stream
immigration target
represents the desired level of immigration (with sub-categories including skilled, family and humanitarian)
skilled migrant stream
- General skills migration - meet broad skill requirements
- Employer-sponsored migration - business nominate specific grants to fill skill gaps
- Distinguishable talent - internationally recognised skills
- Business innovation and investment program - business owners successful overseas
Family migrant
enable family reunification
humanitarian migrant
refugees
Why are macroeco reform needed?
- allow economy to grow faster and at more sustainable rate
- reduce cost inflation pressures
- improve the CAD and NFD through increased competition
- bring about structural changes, with improved efficiency of resources
direct action plan **
the government overarching plan to reduce CO2 emissions by 5% on 2000 levels by the year 2020.
Key policy initiatives driving its achievement:
- emissions reduction fund
- Clean energy (under the management of the clean energy finance corp)
emissions reduction fund
aims to reduce Aus’s emissions growth alongside other existing programs
It will provide incentives for emissions reduction activities
emissions reduction target
the government committed to reducing greenhouse gas emissions to 5% bellow 2000 by 2020
Renewable energy target
set at 20% by 2020,
aimed at lowering Aus’ carbon emissions.
trade liberalisation and achieving other goals
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policy mix
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Policy mix
The combination of different categories of policy (budgetary and monetary) to help promote a particular gov eco goal, e.g. Low inflation
