CHAPTER 39 SUPPLY-SIDE POLICIES

Question 1

Bottlenecks

Answer 1

Supply-side constraints in a particular market in an economy which prevent higher growth for the whole economy

Question 2

Deregulation

Answer 2

The process of removing government controls from markets

Question 3

Industrial policy

Answer 3

Government policy to promote and support individual firms which it considers are important for the growth of the economy

Question 4

Interventionist policies

Answer 4

Government policies designed to correct market failures that are reducing the growth rate of the economy

Question 5

Labour market flexibility

Answer 5

The degree to which demand and supply in a labour market respond to external changes (such as changes in demand for a product or in population size) to return the market equilibrium

Question 6

Market-based policies

Answer 6

Government policies designed to promote economic growth by reducing barriers to the efficient working of free markets.

Question 7

Mininum wage

Answer 7

The least amount an employer can pay one of his workers, usually expressed as an hourly wage rate.

Question 8

Poverty or earnings trap

Answer 8

Occurs when an individual is little better off or even worse off when gaining an increase in wages because of the combined effect of increased tax and benefit withdrawal.

Question 9

Privatisation

Answer 9

The sale of government organisations or assets to the private sector

Question 10

Red tape

Answer 10

Rules and regulations issued by government which firms must adhere to operate legally

Question 11

Supply-side economics

Answer 11

The study of how changes in aggregate supply will affect variables such as national income; in particular, how government microeconomic policy might change aggregate through individual markets.

Question 12

Supply-side improvements

Answer 12

Changes in an individual markets, such as investments by firms or improvements in the skills of workers which lead to an increase in long run aggregate supply without necessarily the intervention of government.

Question 13

Supply-side policies

Answer 13

Government policies designed to increase the productive potential of the economy and push the long run aggregate supply curve to the right.

Question 14

Unemployment trap

Answer 14

Occurs when an individual is little better off or even worse off when getting a job after being unemployed because of the combined effect of increased tax and benefit withdrawal