• Micro-economic policies of the government designed to increase the supply and productivity of the economy that boosts economic growth in the long run.

Some of the major policies include:

• Public-sector investments: governments often spend on the infrastructure of the economy such as the transportation systems & communication networks for the smooth flow of resources to and from the economy thus facilitating efficient growth and development.

• Improvements in education & training: providing high-quality education and occupational training can enhance & polish the skills of the individuals thus they work better and efficiently which results in higher productivity and growth.  Through investing in Edu & training the quality and quantity of labor is improved.

• Investments in healthcare facilities: provision of better, affordable and quality healthcare facilities would result in healthier population leading to better productive work and also save time that is lost on treatments.

• Investments on housing: investing on houses means a greater number of housing spaces increasing the geographical mobility of the population leading to higher output as more and more will be willing to move for work.

• Privatization: private companies tend to be more efficient and productive due to their aim of profit maximization thus higher output. So, transferring some public companies to private ones would help to increase growth.

• Income-tax cuts: reduction in income taxes shall motivate the workers to work and earn more helping the supply to increase.

• Subsidies: subsidy is a financial help from the government given to the firms who need it. This motivates them to produce more leading to higher supply.

• De-regulation: easing or eradicating certain strict laws and regulations for starting up and running business can help them operate and produce higher output at low costs without difficulty, boosting investments.

• Removal of trade barriers: removal of trade barriers such as quotas and tariffs can encourage international trade thus leading to higher output and supply. Reduction in import duties would result in higher goods & services being imported increasing the supply in the domestic economy. Similarly, reduction in export duties would encourage higher exports abroad thereby raising the production in the domestic economy.

• Labor market reforms: by creating laws that decrease the power trade unions can significantly improve output and reduce costs. For example, minimum wages could be decreased to allow more job creation. Similarly, unemployment benefits can be reduced to provoke people to look for jobs instead of relying on the benefits.

  Key Points:

• Supply-side policies have a direct impact on the economic growth since the productive potential of the economy is recognized. Hence, working on it helps in job creation resulting in controlled unemployment.

• However, every policy has its pros and cons. On one hand, tax cuts and public investments would encourage growth and productivity, on the other hand, it may cause the government to suffer major budget deficits.

• Similarly, deregulation & privatization shall decrease government intervention in the economy which may lead to market failure.