Supply Side Policies

Question 1

What are supply side policies?

Answer 1

Policies that focus on increasing the supply of goods and services in an economy to encourage greater productivity and fast economic growth

Question 2

What are the main aims of SSPs?

Answer 2

• to increase incentivise
• to promote competition
• to reform the labour market
• to improve the skills and quality of the labour force
• to improve infrastructure

Question 3

Examples of market- based supply side policies

Answer 3

• reducing income/corporation tax rates
• restructuring the unemployment benefits systems to incentivise the unemployment to seek work
• privatisation & deregulation
• trade liberalisation - removing the barriers to international trade such as tariffs, quotas
• decreasing the trade union power so wages can be decreased
• decreasing minimum wages - lower cop

Question 4

What are interventionists supply-side policy?

Answer 4

• Require government intervention in order to increase the full employment level of output

Question 5

Examples of interventionists supply-side policies?

Answer 5

• increased gov spending on innovation
• increased gov spending on improving occupational mobility - ability of workers to easily move between different occupations, if high, unemployment is low = productivity higher
  Increased gov spending on education and training
  Increased gov spending on healthcare = productivity improves
• increased gov spending on infrastructure

Question 6

What are the strengths of supply-side policies ?

Answer 6

• they increase the rate of growth of an economy
• they reduce average price levels
• they reduce unemployment
• they often increase the value of net exports
• improvements in infrastructure can raise the quality of life for all citizens

Question 7

What are the weaknesses of supply-side policy?

Answer 7

• distribution of income worsens - labour market reforms and wage policies lower worker’s wages
• expensive to implement
• time lags between expenditure and seeing benefits