Lesson 27- Supply side policies Flashcards
What are the key supply side problems for the UK economy?
Persistent productivity gap
Low rates of unemployment
Low trend growth rate of real GDP
Rise of emerging nations
Deep and widening regional economic divide
Structural trade deficit ( Current account Balance of Payments)
Low capital investment and research
Rising inequality and relative poverty
Although supply side reforms can affect both the short run and long run aggregate supply, which one do they usually focus upon?
The long run aggregate supply
What are the two different approaches to supply side reforms/ policies?
Market-led policies
State/government intervention
What is the purpose of market-led policies?
They are designed to make markets work better and give the private sector more freedom.
What is the purpose of state/government intervention?
To overcome market failure
What do market-led supply side policies focus on doing?
Market-led supply side policies focus on reducing the size of the state and boosting the role of market forces in allocating scarce resources.
Give three examples of market led supply side policies?
Cutting government spending (including welfare) and borrowing
Lower business taxes to stimulate capital investment
Lower income taxes to improve work incentives.
Which American President centred his economic policy around market led supply side policies?
Ronald Reagan
What are government intervention supply side policies designed to improve?
The efficiency and productivity of the economy
Give three examples of government intervention supply side policies?
State intervention in public investment and critical infrastructure
Higher taxes on the wealthy to fund public and merit goods
A commitment to a minimum wage or living wage to improve work incentives and productivity in the labour market
The UK’s productivity lags behind that of its peers, how long has the productivity gap been widening for?
Since the start of the global financial crisis in 2007
One of the most significant objectives of supply side policies is to improve what?
Productivity in the UK
Define the term production?
Value of output of goods and services e.g measured by GDP or an index of production in specific industries.
Define the term productivity?
A measure of the efficiency of factors of production
Measured by output per person employed
Or output per person per hour
Why does an increase in production not automatically mean an increase in productivity?
It depends upon how many factors of production have been utilised to supply the extra output.
