4.6.2 Types of Supply-Side Policies

• Supply-side policies aim to shift the aggregate supply (AS) curve to the right
• Name three main types of supply-side policies.

  Tax cuts, deregulation, education
• What is the purpose of education and training as a supply-side policy?

  Improve workforce skills
• Tax cuts are an example of a short-run supply-side policy.


  True
• While short-run policies provide immediate benefits, long-run policies foster sustained economic growth
• Long-run supply-side policies foster sustained economic growth by improving the underlying productive capabilities
• What is the main goal of supply-side policies?

  Increase productive capacity
• Education and training programs are examples of long-run supply-side policies.


  True
• Deregulation reduces compliance costs
• What is the typical timeframe for short-run supply-side policies?

  1-2 years
• Short-run policies provide sustained economic growth, unlike long-run policies.

  False
• Investing in vocational training programs develops specialized skills
• What curve do supply-side policies shift to the right?

  Aggregate supply
• Reducing corporate tax rates encourages businesses to invest and expand operations

  True
• Deregulation involves removing unnecessary licensing requirements
• Match the supply-side policy with its effect on the AS curve:

  Tax Cuts ↔️ Increased investment and labor supply

  Deregulation ↔️ Lower compliance costs and more competition
• Reducing corporate tax rates leads to increased investment and a greater labor supply


  True
• What is the primary goal of supply-side policies?

  Increase productive capacity
• Supply-side policies focus on influencing aggregate demand.

  False
• Reducing taxes on businesses encourages investment and production
• Distinguish between short-run and long-run supply-side policies based on their timeframe.

  1️⃣ Short-run policies focus on increasing productive capacity quickly, typically within 1-2 years.

  2️⃣ Long-run policies involve significant investments that may take several years to yield results.
• What is an example of a long-run supply-side policy?

  Education and training
• What is the timeframe of long-run supply-side policies?

  Several years
• Short-run supply-side policies involve significant investments that take years to yield results.

  False
• Supply-side policies aim to improve productivity and efficiency
• What is the purpose of tax cuts as a supply-side policy?

  Encourage investment
• Supply-side policies shift the aggregate supply (AS) curve to the left.

  False
• Long-run supply-side policies aim to improve long-term efficiency and competitiveness
• What is the goal of deregulation as a supply-side policy?

  Lower compliance costs
• Education and training policies improve the quality and productivity of labor.

  True
• Supply-side policies increase the economy's productive capacity
• Why does lowering personal income tax rates increase the labor supply?

  More incentive to work
• Investing in vocational training programs improves specialized skills in high-demand industries


  True
• How do education and training policies improve the quality of the workforce?

  Higher productivity
• Deregulation simplifies environmental regulations
• What type of subsidies are provided to universities and colleges under education and training policies?

  Funding
• Supply-side policies can significantly impact economic growth by shifting the aggregate supply (AS) curve to the right


  True
• Why does education and training have a limited impact on growth in the short-run?

  Skills take time to develop
• Match the policy type with its short-run and long-run impacts:

  Tax Cuts ↔️ Moderate increase, then larger increase in AS

  Deregulation ↔️ Small immediate shift, then greater competition

  Education and Training ↔️ Limited short-term, significant long-term shift
• Match the supply-side policy with its example:

  Tax Cuts ↔️ Lowering personal income tax

  Deregulation ↔️ Removing licensing requirements

  Education and Training ↔️ Vocational training programs