Theme 2:2.6.3:Supply side policies

Question 1

supply side policies

Answer 1

policies designed to increase the productive capacity of the economy, shifting LRAS to the right

Question 2

market based supply side policy definition

Answer 2

reduction of gov intervention to boost LRAS

Question 3

interventionist supply side policies definition

Answer 3

government intervention in order to boost LRAS

Question 4

interventionist based supply side policies include

Answer 4

-gov investment in infrastructure
-gov investment in education/training
-gov subsidies to promote investment e.g. capital

Question 5

market based supply side policies

Answer 5

-tax reform
-labour market reform
-competition policy

Question 6

what is included in tax reform

Answer 6

-reduction of corporation taxes
-reduction of income tax

Question 7

what is included in labour market reform

Answer 7

-reduction in benefits
-reduction in minimun wage
-reduction of trade union power

Question 8

what is included in competition policy

Answer 8

-deregulation
-privitisation
-trade liberalisation

Question 9

causes of a LRAS shift

Answer 9

increase in quality and quantity of FOP and productive efficiency.

Question 10

evaluation of supply side policies

Answer 10

-cost
-time lag
-negative impact for stakeholders
-output gap
-no guarantee of success

Question 11

cost evaluation

Answer 11

SSPs are costly especially interventionist policies as they require huge amounts of gov spending which could lead to a reduced government budget

Question 12

time lag evaluation

Answer 12

when policies are in place it may take several for changes to be seen to improve productivity e.g. education

Question 13

negative stakeholder impacts evaluation

Answer 13

market based policies e.g. reduction of minimum wages can worsen standards of living

Question 14

output gaps evaluation

Answer 14

is policies implemented in a recession then it will be useless

Question 15

examples of conflict and trade-offs between macroeconomic objectives

Answer 15

economic growth vs protection of the environment

economic growth vs BoP

low unemployment vs low inflation

Question 16

short-run phillips curve

Question 17

what happens in the short run phillips curve

Answer 17

shows the trade off between inflation and unemployment

Question 18

stagflation

Answer 18

shown on short run phillips curve when there is high inflation and high unemployment

Question 19

conflict and trade offs between policies and macroeconomic objectives

Answer 19

interest rates-will decrease inflation-businesses detered from investing-decreases long term econ growth-also raise value of £-decrease exports-worsens BoP

fiscal deficit-affects income equlaity-less gov expenditure