Evaluation questions for the summative 15 mark

Question 1

What are the different types of market based policies?

Answer 1

Incentive-related policies – The aim of this policy is to incentivize individuals to offer more labor, and incentivize firms to accumulate more capital

**Labor market reforms **- the aim of this policy is to make labor markets more competitive, to make wages respond to the forces of supply and demand, and to lower labor costs.

Encouraging competition – The aim of this policy is to increase competition among firms as a way of encouraging them to reduce costs, increase efficiency in production, and invest in innovation.

Question 2

What is a type of incentive related policy?

Answer 2

**Lowering personal income tax **

When people work harder and earn more money it is possible that they wil

Question 3

What is a type of labour market reform?

Answer 3

Abolishing minimum wage legislation

Minimum wage refers to a minimum price of labor (‘wage’) set by governme

Question 4

What is a policy that is Encouraging competition?

Answer 4

Deregulation

Government regulations are often imposed to protect society against unde

Question 5

What is an argument against Deregulation?

Answer 5

Possible negative effects on the environment/ safety

Deregulation may have a number of negative effects. There may be negativ

Question 6

What is an argument against Abolishing minimum wage?

Answer 6

Possible negative effects on equity

Market-based policies often have negative effects on equity. The reducti

Question 7

What is an argument against lowering personal income tax?

Answer 7

**Tax cuts have questionable effects on work, saving, and growth of potential output **

Tax cuts have both demand and supply-side effects. Some economists quest