Th2.6: Evaluation of Supply Side Policies

Question 1

Unlike demand side policies, supply side policies are able to…

Answer 1

both increase output and decrease prices

Question 2

Supply side policies are more…

Answer 2

long-term policies and lead to long term economic growth, rather than small changes in economic growth following changes in AD

Question 3

What can supply side policies be directed at?

Answer 3

exports which will also improve the balance of payments

Question 4

Supply side policies allow two different types of approach:

Answer 4

market based and interventionist, meaning that both free market economists and more interventionist economists will accept and use supply side policies

Question 5

However, what does the Keynesian LRAS curve show?

Answer 5

they have no impact when LRAS is elastic, and so demand-side policies are needed to fix the problem in the short run

Question 6

Moreover, not all supply side policies…

Answer 6

work at actually increasing supply, whilst others cause conflict and both these issues vary depending on which policies are used

Question 7

Often the government has to spend more money or decrease taxes, which will…

Answer 7

decrease their revenue, leading to a budget deficit

Question 8

These actions may also have undesirable impacts on AD and could cause…

Answer 8

higher unemployment or higher inflation

Question 9

Supply side policies can also take a long time to…

Answer 9

have any effect on output and this makes them less useful