Booklet 7 - Macroeconomic objectives and policies (SUPPLY SIDE)

Define supply side policy

the range of measures intended to have a direct impact on AS - and specifically the potenial capacity output of the economy

what are the two types of supply side policy

Market bases supply side policy

interventionist policies

what is the main aim of supply side policy

• promote market forces, cut cost and raise full employment level of output.

what is an interventionist policy

supply side policies involve government intervention to overcome market failure.

examples of interventionist policy

• investment into infrastructure

• commitment to minimum wage and improve work incentives

• higher tax on wealthy to fund public and merit goods

what is market bases supply side policy

relys on allowing markets to work more freely and providing incentives for enterprise and initiative

examples of market based supply side policy

• tax cuts

• privatisation

• free trade

• flexible working

• deregulation

possible side effects on supplyside (EVALUTAION)

• lower tax doesnt neccisarily improve work incentives

• lower corperation tax doesnt always increase business investment

• deregulating makes markets unstable