lesson 12: supply-side policies

Question 1

what is the aim of supply side policies?

Answer 1

improve economic performance by creating more competitive and efficient markets

Question 2

what do supply-side economists argue high taxes do?

Answer 2

disincentives workers and entrepreneurs

Question 3

what do supply side economists think the impact of high taxes will be on overall tax revnues?

Answer 3

overall tax revenues will fall as people are discouraged, depart or wont declare

Question 4

examples of fiscal supply side policies

Answer 4

incentives to work
minimum waged
welfare to work
spending on education
reducing corporation tax - investment
enterprise zones - tackle regional decline and structural unemployment

Question 5

what are the two types of supply side approaches?

Answer 5

interventionist - government intervenes

free market - trusting the free market and boost supply by encouraging workers to work and businesses to invest to increase competitiveness

Question 6

what are the two things that thatcher did?

Answer 6

increased privatisation

cutting union power

Question 7

what did cameron create?

Answer 7

universal credit

Question 8

what should investing in the supply side do for the macroeconomic objectives?

Answer 8

bop - improves as costs decrease through productivity

growth - increases as the quality and quantity of labour and capital improves

unemployment - decreases as improved education and training

inflation - increasing the productive capacity of the economy should reduce the risk of inflation

Question 9

what are the disadvantages of the supply side?

Answer 9

cost
time
firms and workers may react unexpectedly - eg when they get paid more they may work less hours