Supply Side Policy

Question 1

Outline the aim of supply side policies

Answer 1

To increase the long term productive capacity of the economy (shift the AS curve out)

Question 2

Define a policy

Answer 2

The actions taken by the government

Question 3

When does improvement occur?

Answer 3

When the AS curve shifts right

Question 4

Give some examples of free market policies

Answer 4

• abolishing minimum wage
• privatisation & deregulation
• reducing trade union power
• cutting unemployment benefits

Question 5

How does reducing trade union power help improve AS?

Answer 5

It allows firms to hire and fire more easily and charge more competitive rates

Question 6

Give some examples of interventionist supply side policies

Answer 6

• reducing taxation
• subsidies and tax incentives to promote investment
• infrastructure and improvements

Question 7

What are the main areas of supply side policy?

Answer 7

• changes to the labour market
• tax and welfare reform
• education and training
• incentives & technology

Question 8

What are the main goals of supply side policy?

Answer 8

• long term growth
• improving competition
• increasing labour market flexibility
• to increase international competitiveness
• to increase incentives to work

Question 9

What do supply side policies mainly help to improve?

Answer 9

Reduction in the natural rate of unemployment