Supply side policies

What is a supply side policies?

Policies that increase the productive potential (LRAS) of the economy

Why can supply side policies be good?

It can lead to more possible production while also lowering the price level if productivity improves

What can supply side policies also improve?

Some of the other macroeconomic objectives

What are the 5 key supply side policies in this?

• Change visa rules to encourage more skilled overseas workers

• Cut corporation tax

• Cut unemployment benefit

• Increase spending on railway network

• More relaxed rules for smaller firms on meeting health and safety requirements

What is the first group supply side policies can be categorised into?

Does the policy involve government intervention or give more power to the free market

What is the second group supply side policies can be categorised into?

Does the policy involve fiscal policy (government spending/ tax) or regulations

What are 2 interventionist supply side policies?

• The government is doing more than before

• More spending, more tax, more control

What type of economists support interventionist supply side policies?

Economists who believe government needs to control the free market to stop it going wrong

What are 2 market based supply side policies?

• The government is doing less than before

• Less spending, less tax, less control

What type of economists support market based supply side policies?

Economists who believe free markets provide better results than government intervention, due to the power of marker forces, prices and competition

Why is the government changing visa rules to encourage more skilled workers interventionalist?

Government is using its control over its area

Why is cutting corporation tax market based?

Less government taxation compared to before

Why is cutting employment benefits market based?

Government is intervening less in income payments

Why is increasing spending on railway network interventionist?

More spending and more control

Why is more relaxed rules for smaller firms on meeting health and safety requirements market based?

Less control of firms

If the ssp’s are fiscal what does that mean the government is?

Spending more or spending less or increasing tax or reducing tax

If the ssp’s are regulatory what does that mean the government is?

Adding to/taking away government laws and rules

Why is a change in visa rules to encourage more overseas workers regulatory?

Change of a government law

Why is cutting corporation tax fiscal?

Reduction of a tax

Why is cutting unemployment benefits fiscal?

Decrease in government spending

Why is increasing spending on railway networks fiscal?

Increase in government spending

Why are more relaxed rules for smaller firms on meeting health and safety requirements regulatory?

Change of a government law

How does changing visa rules to encourage more skilled overseas workers improve labour force skills?

By bringing in new better quality resources

How does cutting corporation tax increase incentives?

For firms to invest in capital goods as they now have more profit

How does cutting unemployment benefits reform the labour market?

By encouraging unemployed workers to look harder for work

How does increasing spending on railway networks improve infrastructure?

Firms use this to transport raw materials and finish products

How do more relaxed rules for smaller firms on meeting health and safety requirements promote competition?

As costly regulations are removed, helping smaller firms