Th2.6: Supply-side Policies

Question 1

What do supply side policies intend to do?

Answer 1

increase aggregate demand and therefore improve long term economic growth

Question 2

What are supply side policies able to decrease?

Answer 2

long term inflation but may increase it in the short term if they encourage investment as this will increase AD

Question 3

Moreover, policies which decrease trade union power, reduce wages, lower benefits, change taxation e.t.c may…

Answer 3

increase income inequality as these will negatively affect the poorest in the country