hot topics: supply side policies

Question 1

interventionist suply side policies(4)

Answer 1

• G on education
• G on healthcare
• G on infrastructure
• G on subsidies

Question 2

what did the potential growth fall from to now

Answer 2

1.5% to around 1%(certain institutes estimate lower figures)

Question 3

what are the reasons for decreased potential growth(4)

Answer 3

• decreased productivity over time
• shrinking workforce( increased economic inactivity)
• poor business investment
• poor infrastructure improvements

Question 4

what is the effect of supply side policies on curves

Answer 4

• shifts LRAS to the right

Question 5

what are the market based SSP related to tax reforms(2)

Answer 5

• lower income tax
• lower corporation tax

Question 6

what are the market based SSP related on labour market reforms(2)

Answer 6

• decreased benefits
• decrease strength of TU
• relax immigration controls

Question 7

what did the figure of economic inactivity rise from to now

Answer 7

from 20% to 22%

Question 8

what are the 3 types of unemployment that make up the natural rate of unemployment

Answer 8

• structural
• frictional
• seasonal

Question 9

what are the 3 types of SSP that can be used to fix economic inactivity

Answer 9

• G on education(equips people with the right skills to seek employment)
• G on infrastructure( improve transport to allow workers to commute faster to work)
• reducing income tax/ NI(encourage innactive back into work,increase disposable income)

Question 10

what are the 3 types of SSP that can be used to fix natural rate of unemployment

Answer 10

• G on education(reduces structural unemployment)
• reducing benefits(encourages workforce to get back into employment)
• deregulation(easier to hire and fire workforce, firms more likely to hire occupationally immobile workforce)

Question 11

what are the figures to show regional income difference in the UK

Answer 11

south - (> £700 per week)
midlands,north, Wales - (≈ £500 per week)

Question 12

what are the 3 types of SSP that can be used to fix regional disparities

Answer 12

• subsidies( to busisnesses in these small areas in order to improve competitiveness)
• lower corporation tax( encourage business relocation to areas where there are shortages in employment)
• enterprize zones( areas of the country where there are unique business benefits e.g. better infrastructure, tax incentives)

Question 13

what are the side effects of less competitive workfoce

Answer 13

• decreased current accout deficit

Question 14

what are the 2 types of SSP that can be used to imprve pructivity/comeptitivenss

Answer 14

• subsidies( can encourage investment, increasing productivity, improving export competitiveness)
• competition policies

Question 15

what are the 3 types of competition policies

Answer 15

• privatisation
• deregulation
• trade liberalisation

Question 16

evaluation points for SSP(3)

Answer 16

• costs involved(interventionist policies)
• time lags involved
• stakeholder trade offs with specific market based policies( poorer working conditions with deregulation)