Supply-Side Policies Flashcards
What are supply-side policies
Policies that improve productive potential / capacity in an economy - illustrated by an outward shift of LRAS (or the PPF)
What are market-policies designed to do
To make markets work better and give the private sector more freedom
What do supply-side reforms affect
Can affect both short-run and long-run AS - but the focus is usually on LRAS
Time lags with supply-side reforms
Can be long
Main objectives of supply-side policies
- incentives to work
- increase investment and R&D
- non inflationary growth
- encourage new businesses
What macro objectives does a stronger supply-side performance allow a government to meet
- improvement in Philips curve conflicts
- flexible to shocks
- raise living standards + reduce unemployment
- competitiveness
What are interventionist supply-side policies
State (government) driven supply-side policies
What do supporters of interventionist supply-side policies argue
That an interventionist state can have s powerful and positive long-term effect on supply-side performance
Examples of interventionist supply-side policies
- state investment
- min wage
- higher taxes on the wealthy
What is human capital a measure of
Individuals’ skills, knowledge, abilities and health attributes etc.
How can human capital in the U.K. be improved
- education
- training
- inflow of migrants
What is R&D
Focused on the creation and improvement of producers and processes, based on scientific research - applied to market needs
Biggest barriers to innovation
- risk aversion
- uncertainty about firm’s ability to exploit research profitability
- lack of high-skilled workers in key research industries
What is innovation
Putting a new idea of approach into action
What is product innovation
Small-scale, frequent subtle changes to the characteristics and performance of a good or a service
What is process innovation
Changes to the way in which production takes place or is organised
What is creative destruction
A term that refers to the complete upheaval of the established order in the pursuit of innovation
Industrial policies
Many countries have active industrial policies designed to increase investment in emerging sectors that can form the basis for future competitiveness and growth
Key drivers of FDI from overseas business
Super-normal profits
Rising per capita incomes
Out sourcing
Avoiding trade barriers
