SSPs

Question 1

define SSPs

Answer 1

policies designed to increase productive capacity of the economy, shifting LRAS outwards

Question 2

adv of interventionist SSPs

Answer 2

• more spending on education= more schools and teachers
  = better quality of education to increase skills and labour productivity
• gov spending on infrastructure= new roads, ports, bridges etc
  = low LR CoP= easier and cheaper to access raw materials
  = higher productive efficiency= increase Q capital stock
• subsidies on capital investment= more LRAS

Question 3

adv of market based SSPs

Answer 3

• low income tax= more incentive for inactive to join labour force= incentive to work harder and earn more income
• low corporation tax= more retained profits to use for investments to increase capital etc
• labour market reform
  = decrease welfare benefits= incentive to enter labour force and find work= increase workforce
• decrease min wages= low CoP= productive
• competition policies like privatisation
  = more competition= firms must decrease CoP= proactive efficiency

Question 4

list interventions SSPs

Answer 4

• education
• infrastructure
• subsidies

Question 5

list market based SSPs

Answer 5

• low income tax
• low corporation tax
• less welfare benefits
• lower minimum wage
• privatisation

Question 6

disadv/evaluation of SSPs

Answer 6

• no guarantee of success= risk of x inefficiency of gov finances= OC
• time lags= cld spend years to build infrastructure or for education to produce jobs for kids growing up
• expensive risk of gov finances= OC
• must target specific policies