Supply-side policies

Question 1

What does the position of the AS curve depend on?

Answer 1

The quantity factor inputs available in the economy

Question 2

What are supply-side policies?

Answer 2

A range of measures to increase AS and the potential output of the economy

Question 3

Why might improvements in the supply side sector of the economy rise from the private sector rather than government policy?

Answer 3

The private sector want to boost labour productivity in order to reduce costs and become more competitive

Question 4

What are supply side policies designed to do? (3)

Answer 4

Increase the productive potential
Make markets more efficient
Increase the rate of economic growth

Question 5

What are some examples of supply-side policies? (4)

Answer 5

Labour market measures
Tax reforms
Reform on the welfare state
Industrial and competition policy

Question 6

What are labour market measures?

Answer 6

Improving education and training

Question 7

What are tax reforms?

Answer 7

Reducing the overall burden of income tax

Question 8

What is the reform of the welfare state?

Answer 8

Reducing state welfare benefits

Question 9

How does reducing state welfare benefits increase AS?

Answer 9

Creates an incentive for people to go to work

Question 10

What is industrial and competition policy? (2)

Answer 10

Privatisation

Deregulation

Question 11

What are the 2 approaches to improve the supply-side?

Answer 11

Labour market

Product market

Question 12

What is the labour market?

Answer 12

An example of a factor market, in this case labour is bought and sold

Question 13

What is the product market?

Answer 13

Markets in which all kinds of goods and services are traded

Question 14

What are policies aimed at the labour market intended to do?

Answer 14

Improve the quality and quantity of the supply of labour available in an economy

Question 15

By increasing the quantity and quality of the supply of labour, what risk is being reduced?

Answer 15

the risk of structural unemployment

Question 16

If the government introduce education and training schemes, how will this affect labour force? (4)

Answer 16

Productive
Mobile
Flexible
Improve international competition

Question 17

What is a trade union?

Answer 17

An organisation of workers set up to negotiate on wages, working hours and working conditions on behalf of its members

Question 18

How do trade unions affect the supply-side of an economy?

Answer 18

Increases wages = higher costs = reduces efficiency = reduced competition

Question 19

What are policies aimed at the product market intended to do? (2)

Answer 19

Increase competition and efficiency

Question 20

What is privatisation?

Answer 20

Sale of government owned assets to the private sector

Question 21

What is deregulation?

Answer 21

The process of removing government controls from markets

Question 22

How does privatisation affect the supply-side of the economy?

Answer 22

Privately owned assets have more incentives to be efficient and competitive

Question 23

How does deregulation affect the supply-side of the economy?

Answer 23

Makes markets more competitive

Question 24

Why is competition a good thing?

Answer 24

Forces a business to become more efficient in the way they use scarce resources

Question 25

What is corporation tax?

Answer 25

A tax on company profits

Question 26

How does a higher tax rate on investment income affect the level of saving?

Answer 26

Saving will fall because the return on saving has decreased