2.6.3a

Question 1

what is supply side economics

Answer 1

study of how changes in long run aggregate supply will affect variables such as GDP
- supply side policies

Question 2

Describe the ffects of supply side policies in the long term

Answer 2

• Over time, there tend to besupply-side improvements independent of the government, through actions of the private sector such as investment.
• However, the government is able to use supply-side policies in order to increase and speed up these improvements and overall increase rate of economic growth

Question 3

What are market based policies?

Answer 3

• policies which are designed to remove anything that
  prevents the free market system working efficiently, causing lower output and higher prices

Question 4

What barriers do market based policies remove

Answer 4

barriers include those which reduce willingness of workers to take jobs or lead to inefficient production, high prices or a lack of risk-taking.

Question 5

What are interventionist policies

Answer 5

• Interventionist policies are policies designed to correct market failure,
• for example the free market under provides education and so the government provides it.
• Also, firms may only look into the short term and look to maximise short run profits to give to shareholders instead of investing, so governments may take actions to encourage investment.

Question 6

WHat doe free market economists prefer

Answer 6

Free market economists tend to argue for market-based policies as they want the government to have as small a role as possible

Question 7

Examples of interventionist policies

Answer 7

• Investment in human capital: education and health services
  + Training and education
  + * Improved health care services and access to these.
• Investments in new technology
• Investments in infrastructure
  + Support for small and medium-sized enterprises or firms (SMEs).
  + Support for ‘infant industries’.

Question 8

Examples of market based supply side policies

Answer 8

• encouraging competition
  + Privatisation.
  + deregulation
  + Private financing of public sector projects
  + ontracting out to the private sector (outsourcing).
  + Restricting monopoly power
  + trade liberalisation
• labour makret reforms
  + Abolishing minimum wage legislation.
  + Weakening the power of labour (trade) unions
  + * Reducing unemployment benefits.
  + Reducing job security
• incentive related policies
  + Lowering personal income taxes. A
  +* Lowering taxes on capital gains and interest income
  + Lowering business taxes

Question 9

Evaluate supply side policies

Answer 9

check pmt notes