supply side policies Flashcards
Aggregate supply
-Total value of planned production by domestic firms of goods and services over a period of time
-Productive capacity of an economy
-Importance of supply side policies
-Provides long term platform for growth without inflation
-higher productivity leads to better living standards
-more competition leads to lower prices and welfare gains
-The UK becomes more competitive in global markets
Determinants of long term trend rates
-Investment in capital leads to higher productive capacity - quantity increases
-Technological developments increase productivity of capital
-Labour productivity is determined by levels of training, education, qualifications, skills, motivation
-Flexibility and mobility of factors of production
-Public sector investment
supply side policies are designed to
-improve incentives for people to find and get new jobs
-increase productivity of labour and capital factor inputs
-improve occupational and geographical mobility of labour to reduce unemployment
-increase level of capital investment and research and development spending by firms
-stimulate inflows of overseas capital investment
-promote more competition within and between markets
-stimulate invention and innovation
-provide a platform for inflationary growth