Supply Side Policy

Supply Side Policy

Policies designed to increase the productivity capacity of the economy, shifting LRAS to the right

Interventionist SSP

Government intervenes with policies to help fix the market

Market-Based SSP

Allows the market to adjust on its own

Examples of Market Based SSP

Tax reform
Labour market reform
Competition policy

Examples of Interventionist SSP

Gov. spending on education/training
Gov. spending on infrastructure
Subsidies to firms to promote investments

How to boost LRAS

Increase in quantity of FOP
Increase quality in FOP
Increase productive efficiency (less cost of prod.)

Tax Reform

Lower income tax
Lower corp. tax

Labour Market Reform

Reduce unemployment benefits
Reduce min. wages
Reduce trade union power

Competition policies

Privatization
Deregulation
Trade liberalization

Cons of SSP

No guarantee of success
Costly to implement these policies
Time lags (many years till effective)
Negative stakeholder impacts