Chapter 28- supply side policies

Question 1

definition of supply side policy

Answer 1

measures designed to increase aggregate supply

Question 2

what are supply side policies

Answer 2

• increase productive potential
• increase the quantity and quality of the FOP
• raise the efficiency of product and factor markets

Question 3

1. Improving education and training

Answer 3

• designed to increase the skills of the workers
• higher labour productivity means reduced costs of production and increased quality of the products produced
• firms can sell more and are therefore likely to expand
• supply adjusts quickly to changes in demand

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Question 4

2. Lowering direct taxes and increasing incentive