4.6.3 Effects of Supply-Side Policies

• Supply-side policies aim to increase productivity by improving the efficiency and skills of workers
• Match the supply-side policy with its goal:

  Education and training ↔️ Improve worker skills and productivity

  Tax cuts ↔️ Increase incentives for investment and entrepreneurship

  Deregulation ↔️ Reduce barriers to entry and promote competition

  Privatization ↔️ Improve efficiency of state-owned enterprises
• Tax cuts increase incentives for investment and entrepreneurship
• What is one of the main goals of supply-side policies related to investment?

  Encourage new capital
• What are supply-side policies aimed at increasing?

  Productive capacity
• Supply-side policies encourage businesses to invest in new capital and technology.


  True
• What is the intended effect of supply-side policies on the economy's long-run aggregate supply curve?

  Shift to the right
• Education and training aims to improve worker skills and productivity.


  True
• Match the supply-side policy with its goal:

  Education and training ↔️ Improve worker skills and productivity

  Tax cuts ↔️ Increase incentives for investment and entrepreneurship

  Deregulation ↔️ Reduce barriers to entry and promote competition

  Privatization ↔️ Improve efficiency of state-owned enterprises
• Supply-side policies are designed to increase the efficiency with which resources are used to produce goods and services.


  True
• Investment in infrastructure improves transportation, communication, and energy networks
• How do supply-side policies affect the long-run aggregate supply (LRAS)?

  Shift LRAS to the right
• Tax cuts encourage investment and entrepreneurship.

  True
• What is the ultimate goal of supply-side policies in terms of economic growth?

  Higher sustainable growth
• What are two key supply-side policies that affect inflation?

  Tax cuts and labor market flexibility
• Supply-side policies aim to increase the productive capacity
• Match the supply-side policy with its primary goal:

  Education and training ↔️ Improve worker skills

  Tax cuts ↔️ Increase incentives

  Deregulation ↔️ Promote competition
• What is the intended effect of supply-side policies on the LRAS curve?

  Shift LRAS to the right
• What is the primary goal of deregulation as a supply-side policy?

  Promote competition
• Education and training aim to improve worker skills and increase productivity
• Technology and innovation encourage the development of new and more efficient processes
• What is the primary goal of supply-side policies?

  Increase productivity
• Deregulation reduces bureaucratic hurdles, allowing businesses to operate more efficiently.

  True
• Steps in the implementation of supply-side policies

  1️⃣ Education and training

  2️⃣ Technology and innovation

  3️⃣ Deregulation

  4️⃣ Infrastructure investment

  5️⃣ Incentive schemes
• How do supply-side policies affect the long-run aggregate supply (LRAS)?

  Shift it to the right
• Tax cuts encourage investment, which increases capital stock and productivity
• How do supply-side policies affect inflation?

  Moderate price levels
• Supply-side policies can reduce structural unemployment by improving worker skills.

  True
• Why do tax cuts encourage investment and job creation?

  Lower production costs
• How do supply-side policies enhance a country's competitiveness?

  Increase productive capacity
• Education and training improve worker skills, allowing businesses to produce higher quality goods and services efficiently.

  True
• Deregulation reduces bureaucratic barriers, allowing businesses to operate more flexibly
• Why is infrastructure investment important for competitiveness?

  Lowers operational costs
• Steps for governments to strengthen economic competitiveness through supply-side policies

  1️⃣ Implement education and training programs

  2️⃣ Reduce tax burdens for businesses

  3️⃣ Reduce bureaucratic regulations

  4️⃣ Invest in infrastructure
• Prioritizing economic growth over environmental protection can result in increased environmental damage
• Tax incentives and deregulation can fuel speculative bubbles if not carefully implemented.

  True
• Education and training improve worker skills and productivity
• How does education and training enhance productivity in supply-side policies?

  Improves worker skills
• Tax cuts encourage investment and entrepreneurship, shifting the long-run aggregate supply curve to the right.


  True
• Education and training increase the productivity of workers