3.6. Supply-Side Policies

Supply-Side Policies

Policies designed to increase the potential output of the economy (improve the quality and/or quantity of the factors of production).

Full Employment Level of Output (Yf)

The level of output at which there is only natural unemployment.

Interventionist Supply-Side Policies

Policies involving active government intervention in markets to improve the quality and/or quantity of the factors of production.

Infrastructure

Capital stock usually provided by the government that is essential for economic activity.

Market-Based Supply-Side Policies

Policies involving reducing government intervention in markets to improve the efficiency of the factors of production.

Privatisation

The sale of government-owned assets to private investors.

Labour Market Reforms

Policies that aim to improve the flexibility of the labour market, either encouraging labour force participation or allowing wages to fall to increase hiring.