supply-side policies (3.7)

Question 1

what are supply-side policies

Answer 1

policy that increases the productive potential, which is the ability of the economy to sup[ply more goods and services

Question 2

what are the objectives of supply-side policies

Answer 2

1. Improve incentives to look for work and invest in people’s skills
2. Increase labour and capital productivity
3. Increase occupational and geographical mobility of labour to help reduce the rate of unemployment
4. Increase investment and research and development spending
5. Promoting more competition
6. Encourage the start-up and expansion of new businesses / enterprises especially those with export potential
7. Improve the trend rate of growth of real GDP

Question 3

what are some supply-side policies

Answer 3

• education and training
• reducing power of trade unions
• reducing direct taxes on workers
• reducing benefits
• reducing direct taxes on firms
• development of infrastructure

Question 4

costs of supply-side policies

Answer 4

• time lags
• cost
• resistance to policies
• equality issues
• unintended affects

Question 5

benefits of supply side policies

Answer 5

• combats inflation :; markets more efficient and productivity increases
• increases employment
• increases economic growth
• improves balance of payments