LS13- Supply Side Policies

Question 1

Supply side policies

Answer 1

• Policies used to increase the productive capacity of the economy, shifting LRAS to the right.
• Market based- allows markets to work more freely; e.g. remove barriers which stop market from operating efficiently
• Interventionist- policies that require government intervention; e.g. government initiatives, such as skills and training support

Question 2

Interventionist SSPs

must raise quality or quantity of faopr or improve productive efficiency

Answer 2

• Gov spending into human capital- education & training
• Gov spending into infrastructure
• Subsidies to firms to promote investment

Question 3

Market based SSPs

Answer 3

• Tax reforms incentivise employment (less income tax) and allow for increased investment (corporation tax)
• Labour market reforms e.g. reduce benefits, min wage, trade union power
• Competition policy e.g. privatisation, deregulation, trade liberalisation boosts competiton so firms improve productive efficiency to remain competitive

Question 4

Evaluation of SSPs

Answer 4

• No guarantee of success e.g. firms can misuse subsisdies or employees may not use skills gained
• Opportunity costs
• Time lags