supply side policies

define supply side policies

1. SSP are government attempts to increase productivity and shift AS to the right

name four SSP

1. education and training

2. reducing benefits

3. reducing income tax

4. reducing power of trade unions

reducing power of trade unions. defenition, two pros and an eval

a trade union is an organisation which represents workers rights and negotiates on their behalf through collective barganing

increase efficiency of firms

reduce unemployment as the wage rate should be lower

TU are at all time low and only found in public sector. lower disposable income

education and training. , two pros and 3 eval

1. better education can increase labour productivity and inc AS

2. government intervention is required to subsidise it because its a merit good

3. this is costly and requires high tax. takes time for effect to work

4. can cause government failure if allocat resources ineficiently

5. little use in a resesion over other policies

reducing benefits one pro two evals

1. this could reduce the unemployment trap.

2. only works if the NMW is set high enough to ensure sufficient wages

3. if unemployment is structural then workers would need to inc training

reducing income tax one pro two evals

output can increase as greater incentives to work increase disposable income

may increase leasure time as being paid more so less incentive.

tax cuts reduce g’ments revenue to spend on services.

overall evaluation

supply side policies take decades before effects are shown. and may not be best at reducing inflation pressures