Supply-side Policies

Question 0

Examples of SSP?

Answer 0

Improving:

• productivity
• availability of resources
• decreasing tax
• removing regulations that add CofP

Question 1

What are supply side policies?

Answer 1

Any actions by the government intended to increase the amount that firms are willing to supply at any given price level (shift AS curve to the right).

Question 2

3 ways to achieve SSP?

Answer 2

• Increase price flexibility and signalling (how?)
• Increasing competition (getting rid of legal monopoly right such as with UK post office means that cost have to decrease for them to stay competitive)
• Improving incentives - reducing taxes on firms

Question 3

How effective are SSPs?

Answer 3

• time lag (education improvement takes long time to take effect)
• some industries have very little opportunity for increased competition such as in NHS
• can cause side effects on demand side - eg cutting taxes affects FP too
• good because can lower inflation and increase growth