Supply-side policies

Question 1

Supply-side policies

Answer 1

• aim to increase aggregate supply in an economy
• suitable for cost-push inflation

Question 2

Interventionist ss side policies

Answer 2

• increase AS by gov intervention
• counteract mkt deficiencies

Question 3

Interventionist ss side policies

Answer 3

1. Improvements in infrastructure
2. Human resource development e.g SkillsFuture 90% subsidy
3. Investment in new tech e.g. SG $16 bil for R&D

Question 4

Mkt based ss side policies

Answer 4

• aim to increase rate of growth of AS
• encouraging private enterprise
• freer play of mkt forces

Question 5

Mkt base ss policies

Answer 5

1. Privatization
2. Deregulation
3. Trade liberalization
4. Anti-monopoly legislation

Question 6

Privatisation

Answer 6

• transfer of ownership of firm
• public to private
• increase efficiency due to improved management (less red tape and bureaucracy, high administrative costs, unproductive workers)
• incentive to lower cost and max profits

Question 7

Deregulation

Answer 7

• elimination or reduction of gov regulation of private sector activities
• based on argument that gov regulation stifles comp and increases inefficiency
• main form of regulation e.g. allow new private firms to enter monopolistic or oligopolistic industries –> drive competition, increase efficiency

Question 8

Trade liberalization

Answer 8

• freer int trade
• reduction in trade barriers
• increase comp betwn domestic and int firms
• greater efficiency in pdtn

Question 9

Strength of ss-side policy

Answer 9

1. No conflict with macroeconomic goals (both int and mkt-based)
2. Reduces Y inequity (int)
3. Improved resource allocation (mkt-based)
4. May not burden gov budget (Mkt-based)

Question 10

No conflict with macroeconomic goals

Answer 10

• help to promote econ growth and employment
• maintain low inflation
• rise in LRAS –> fall in GPL

Question 11

Reduce income inequity

Answer 11

• int policies focus on investment in human capital
• more likely to be employed in higher paying job
• provide income to those prev unemployed
• income more likely to be more equally distributed

Question 12

Constraints

Answer 12

1. Time lag
2. Cost to gov
3. Worsen income inequity
4. Env impact

Question 13

Time lag

Answer 13

• Int policies: limited in the SR, takes time to persuade employers and workers of the need for skills upgrading, takes time to learn new skills
• Mkt-based: work after significant time lags, activities set into motion ie. increased competition need time to materialize to affect potential output