C39 Supply Side Polices Flashcards
What are the aims of supply side policies?
Expand the productive potential of the economy
Increase trend growth rate
How do supply side policies work?
Changes to the economic infrastructure to maximise efficiency.
What are free market supply side policies?
Increase efficiency by removing things that interphere with the free market
E.g: tax cuts, privatisation, increase labour market efficiency
What are interventionist supply side policies?
Used to correct market failure
E.g : spending on education or infrastructure
What are supply side policies?
Small micro economic changes that have a large impact on the macroeconomic
What are examples of supply side policies?
Create incentives
Trade liberalisation
Encourage competition
Reduce unemployment
Reduce income tax
Improve education
Reduce firm regulation
What is trade liberalisation?
Trade barriers removed allowing goods and capital to flow mote freely
How can they increase competition?
Deregulation
Privatisation
Contract services out
Provide support for new / small firms
What is deregulation of financial market?
Removing restrictions to increase efficiency
What does removing unemployment benefits do?
Create incentives to work –> increase the efficiency
What does removing income tax do?
Incentivizes people to work die to more pay
What does improving education do?
Learn skills—> more productive efficiency—> occupational mobility
What does improving labour market flexibility do?
Makes it easier for firms to make people redundant
Increase productive efficiency
What does reduction in regulation for firms do?
Less costs for firms –> more spending in employment
What are the benefits of supply side policies?
Increase trend growth rate
Reduces inflation
Allows for the achievement of all economic objectives
