Supply Side Policy Flashcards
1
Q
Supply side policy
A
Types of policy to increase productive potential of the economy & push LRAS right
2
Q
Main types of ssp
A
Market base policy: increase econ growth by decreasing gov intervention … free market works efficiently
Interventionist policy: gov intervention to correct market failure
3
Q
Market base policy
A
●incentives
●Competition
●reform the Labour market
4
Q
Interventionist policy
A
●improving skills & quantity of labour force
- ed … INCREASE QUALITY
- training = cost to firms so gov set training schemes to INCREASE QUALITY of labour force
●improve infrastructure
- INCREASE QUALITY of capital gs
5
Q
EVAL points
A
- deregulation … ‘creaming’ of the markets = firms only provide gs that are profitable
- time lag = changes to ed not evident straight away & changes to tax wont see increase quality in labour force
- ssp ineffective in a recession
6
Q
incentive (market base policy)
A
- increase income tax …workers not willing to work … DECREASE QUANTITY & EFFICIENCY
- increase corporation tax … employers not hiring new workers / no I / no raw materials / DECREASE QUANTITY & EFFICIENCY
- welfare benefits … workers not willing to work bc benefits more attractive … DECREASE QUANTITY
- subsidising workers = increase subsidies … increase incentive to work bc low paid workers get more income tax credit … reduces poverty gap & INCREASE PRODUCTIVE EFFICIENCY
7
Q
competition (market base policy)
A
- privatisation: sale of gov assets/organisation to the private sector
Assets used to more efficiently than gov bc incentives by profit motive so INCREASE PTODUCTIVE EFFICIENCY - deregulation: removing gov controls from free market
Firms provide g/s … reduces price & INCREASE OUTPUT
8
Q
reform the labour market (mbp)
A
- migration …increase net inward migration of working age ppl … increase potential size of labour force … decrease wages … decrease inflationary pressure … INCREASE QUANTITY
- minimum wage = decrease min wage … decrease LR CofP … INCREASE PRODUCTIVE EFFICIENCY
