Supply Side Policy SSP

Question 1

Drawbacks of FP/MP

Answer 1

Trade off between inflationary pressure and increased EG (FP)
Trade off between reduced EG and reduced inflationary pressure (MP)
Implications for BoP (FP/MP)

Question 2

SSP aim: encourage investments

Answer 2

Improving transport and infrastructure = investment/reduced cost of transport
Increase free trade/trade = incentive for export firms to invest

Question 3

SSP aim: improve flexibility if markets

Answer 3

Encourage immigration = help firms keep up with D/increase flexibility if markets

Question 4

SSP aim: promote competitiveness in markets

Answer 4

Deregulation reduce barrier to enter a market = competitive market = decrease price/increase quality of goods and services

Question 5

SSP aim: provide incentives to work

Answer 5

Decrease income tax rates = increased incentive to work

Decrease unemployment benefits/JSA

Question 6

SSP aim: improve labour productivity

Answer 6

Increase education and training 
Improve healthcare (time lost to ill health)

Question 7

SSP aim: decrease geographical immobility

Answer 7

Build more affordable homes (more expensive to live in some areas)

Question 8

SSP advantages

Answer 8

Help decrease inflationary pressure long term
Help create real jobs and sustainable growth bc +ve effect in labour productivity/competitiveness
Increased competitiveness = improves BoP
Less likely to create conflicts between main objectives of macro

Question 9

SSP disadvantages

Answer 9

Increase prod potential not enough to raise econ performance if there’s a lack of AD
Time lag
Costly to implement
Issue of equity
Some SSPs resisted bc may decrease power of various interest groups