Supply Side Policies Flashcards
In what ways can supply side policies increase aggregate supply?
1) increase Labour productivity and reduce the cost per unit for a good.
2) Make Labour Markets more Flexible.
3) Increase Incentives at the margin.
4) Increase Migration into the UK.
5) Increase Investment/reduce tax to free up money for investment.
How can you make labour markets more flexible?
1) Increase External Numerical Flexibility (make it easier to hire/fire people).
2) Increase Numerical Flexibility (make it easier to adjust the hours people work).
3) Increase Functional Flexibility (make it easier for workers to change from one task to another).
4) Increase Wage Flexibility.
5) Increase Geographical Flexibility (How willing firms and individuals are to relocate around the country).
What are the issues with Supply Side Policies?
1) They take a long time to come into effect normally.
2) It is hard to measure the actual effect they have.
3) They are sometimes overlooked as they wont help the current government get back into power because the effects take time to be seen.
What do supply side policies effect?
Supply side policies effect Aggregate supply. They are used to increase the factors of production: Land, Labour, Capital and Enterprise.
