Supply Side Policies

Question 1

Supply Side Policies

Answer 1

Government policies designed to increase productive potential of the economy and push the LRAS curve to the right

Question 2

Name some supply side policies

Answer 2

Labour Market Reform

• Reduce barriers to free market
• Flexible Labour Markets (Work in other parts of business)
• Reduce power of trade union
• Short term contracts
• Flexible working arrangements (Longer hours)
• Hiring and firing (Government cut legislation)
• Contracts, terms and conditions, pay
• However, some people see this supply side policy an exploitation of labour, decrease living standards etc.

Tax and Welfare Reform

• Decrease corporation tax, increase startup, increase AD.
• Make it harder to obtain welfare, increases incentive to work, increases AD.
• Decrease income tax, more incentive to work.

Education and Training

• Modern apprenticeships (people being more trained in work forces)
• Expansion of vocational qualifications.
• Expansion of university access.

Incentives and Technology

• Tax reform to encourage incentives and entrepreneurial spirit.
• Incentives to develop new technology investment.
• Drive to embracing ‘knowledge driven economy’

Promoting Competition
- Privatisation - Is the sale of government organisation or assets to the private sector. Privatising firms will give more incentive to cut costs and innovate

• Deregulation - Is the process of removing government controls from the markets (often called red tape)