Supply Side Policies

Question 1

What effect do supply side policies have

Answer 1

Can increase trend growth and LRAS
Improve flexibility of product and factor markets

Question 2

What is meant by supply side policies

Answer 2

A policy designed to increase AS by improving the efficiency of labour and product markets

Question 3

What are the supply side policies

Answer 3

Education and training
Government assistance to new firms
Reduction in direct taxes
NMW
Reduction in unemployment benefits
Reduction in trade union power
Privatisation
Deregulation

Question 4

What types of supply side policies are there

Answer 4

Market based - policies that rely on allowing markets to work more freely and providing incentives for enterprise and initiative
Interventionist - policies by which the govt intervenes to stimulate AS

Question 5

What are some interventionist supply side policies

Answer 5

Investing in public services
Commitment to NMW
Tax incentives and welfare reforms
Regional policy to boost under-performing areas
Nationalisation

Question 6

How can you evaluate supply side policies

Answer 6

Do they reduce unemployment - depends, not if cyclical unemployment because that needs AD
Is it short-termist
Impact on the government budget
Effects on equity
Time lag