Chapter 32 Flashcards
What are supply-side policies
A range of measures intended to have long-run aggregate supply and the potential capacity output of the economy
What are market-based supply-side policies
Policies that rely on allowing markets to work more freely and providing incentives for enterprise and initiatives
What are interventionist supply-side policies
Policies by which the government intervenes to stimulate aggregate supply
The position of the long-run supply curve depends on 2 factors
Quantity of factor inputs available
The effectiveness with which the factor inputs are used
What is privatisation
Where publicly owned enterprises are sold into the private sector.
What do neoclassical argue about privatisation
That will lead to increased efficiency as firms become accountable to shareholders are they are incentivised and they incentivised to increase efficiency to be more productive and therefore more profitable. Also profit motive
Improving labour market flexibility
limit the power of trade unions who can lead to inflexibility by trying to push up wages, or resistance to new practices that can improve productivity. Abolish minimum wage to improve flaxability
Evaluate: must be protection for low-paid workers
What are the market-based policies
Privatisation/deregulation, improved labour market flexibility, reforms to tax and benefit system
What is the main interventionist policy
Training and education (for of human capital investment) others are: infrastructure, subsidies, r&d, competition policy, immigration control
What is the benefit of more investment in training and education?
It results in more skilled workers, which are therefore more productive workers. Increasing in productivity means producing more output with the same level of input. Therefore shifting LRAS right
Effects on Unemployment with more government spending
reduction in the unemployment rate due to derived demand for labour
Evaluating Training and education
time lags, education takes a long so effects may take long time to come in effect
Spending on education is still much higher in other countries. so may not make it cheaper than others just cheaper
Effects of reducing welfare bendfits
makes the opportunity cost of not working higher, or harder to I’ve on benefits therefore they might re enerter work for a better quality of life. (economically inactive)
Evaluating reform welfare and ebenfits policies:
thought it would negatively affect those that are unable to work such as those with disabilities.= therefore it would just increase inequality
why investment into infrastructure (interventionist)
making transport more efficient and communication networks. The free market would not provide them so the government has too.
