Supply side policies Flashcards
what do supply side policies aim to do
increase the overall productive capacity of an economy by improving the efficiency of markets, enhancing incentives to work, and encouraging investment
what are 10 supply-side policies
- reducing taxes and regulation
- labour market reforms
- investmnt in infrastructure and innovation
- market liberalisation and competition
- monetary and fiscal policy coordination
- enhancing property rights and business environment
- encouraging trade and international investment
- reforming the tax system
- regional policy
- encouraging savings and investment
how does reducing taxes and regulation help supply side policies
tax cuts - reducing the tax burden for firms and individuals increases incentives to invest
deregulation - reducing barriers and regulatory burdens promotes efficiency and competition
how do labour market reforms help supply side policies
reducing trade union power - making the labour market more flexible and reduce wage inflationary pressures
welfare-to-work programmes - encouraging people on benefits to starts working by having low tax rates and introduciong tax credits for low-wage workers
training and skills development through investment in education, raising productivity
how does investment in infrastructure and innovation help supply side policies
spending on public infrastructure such as transport, enhances productivity
research and development, technological advancements
how does market liberalization and competition help supply side policies
‘lessening of government restrictions and regulations, market is controlled by supply and demand’
privatisation - selling off state owned enterprizes to private investors to improve efficiency, competition and innovation
competition policy - strengthening anti-monopoly laws to encourage competition, increases consumer choice
hoe does monetary and fiscal policy coordination help supply side policies
while mainly focused on long-term growth,supply side policies also work alongside with monetary and fiscal policies
how do enhancing property rights and business environment help supply side policies
secure property rights for businesses and individuals
encouraging entrepreneurshuip through a more business-friendly environment, simplifying the tax system, and reducing barriers to entry
how would encouraging trade and international investment help supply side policies
free trade removes barriers and gives access to global markets to encourage competition and investment
foreign direct investment - attracting international investment by offering lower corporate taxes and subsidies
how does reforming the tax system help supply side policies
reducing regional disparities - fostering growth in underdeveloped regions of the uk through targeted investments, encouraging business start ups and improved transport links
how does encouraging savings and investment help supply side policies
policies that incentivize savings and long term investment, such as tax-advantaged savings accounts, pension reform and support for the financial services sector.
evaluation of supply side policies
aim to boost economic growth by increasing the economies potential output and creating a more efficient, competitive market.
However, they often take time to show results and are sometimes contrivertial due to the social and equity impacts (inequality, wage stagnation) that may arise in the short term
how can you show improvements in the productive capacity of the economy on diagrams
shift outwards of the PPF
shift outwards of LRAS curve - keynsian or classical
benefits of supply-side improvements
allows government to meet more of the macro objectives
allows a reduction in unemployment, without inflation becuase AS has moved out but not AD
improved living standards through stronger long term economic growth
improved competitiveness in global markets and achieve a stronger balance in the trade of goods and servicesd
isadvantages of supply side policies
time lags - training and education may take several years for its full effects to be felt
costs - may be expensive to impliment infrastructure projects
