2. Supply Side Policy

What are Supply Side Policies

Policies designed to increased the productive capacity of the economy, shifting LRAS to the right

Examples of Interventionist Supply Side Policies

Government Spending on Education/Training

Government Spending on Infrastructure

Subsidies to Promote Firm Investment

Examples of Market Based Supply Side Policies

Lower Income Tax

Lower Corporation Tax

Reduce Benefits

Reduce Minimum Wages

Reduce Trade Union Power

Privatisation

Deregulation

Trade Liberalisation

Pros of Supply Side Policies

Increase in Quantity of Factors of Production

Increase in Quality of Factors of Production

Productive Efficiency

Cons/Evaluation of Supply Side Policies

No Guarantee of Success

Cost

Time Lags

Negative Stakeholder Impacts

Output Gaps

Need for Targeted Supply Side Policies