Supply Side Policy

Question 1

Supply side policy purpose

Answer 1

To increase an economies ability to produce goods and services

Question 2

Market based supply side policies

Answer 2

Privatisation - selling state owned assets to private sector increase competition

Deregulation-reducing barriers to entry- allowing greater comp- lower pricing and greater AD

Reducing income tax rates- increase labour supply

Question 3

Interventionist supply side policy

Answer 3

Increase govt spending on areas like education and transport

Reducing structural unemployment- increasing school leaving age, investing in transport

Infalstructure spending

Question 4

Benefits of supply side policy

Answer 4

Lower inflation- makes the economy more efficient reducing cost push inflation. E.g privatisation leads to more efficiency and lower prices

Lower unemployment- education addressing structural unemployment

Econ growth increasing

Question 5

Negatives of supply side policy

Answer 5

Costly to implement , hurting the current account- higher tax rates Laffer curve

Time lag- demands and climate may change by then

Output gap (E)