2.5 Supply-Side Policies

• What are supply-side policies aimed at increasing?

  Productive capacity
• What type of economic growth do supply-side policies primarily focus on?

  Long-term growth
• Labor market reforms are supply-side policies that increase labor market flexibility.


  True
• Match the type of policy with its objective:

  Tax Cuts ↔️ Increase incentives to work

  Deregulation ↔️ Improve business flexibility

  Investment Incentives ↔️ Encourage capital accumulation
• One key objective of supply-side policies is to improve labor and capital efficiency.
• Supply-side policies aim to shift the aggregate supply curve to the right
• Enhancing market flexibility enables quicker responses to economic changes
• What is the goal of improving labor skills in supply-side policies?

  Boost workforce productivity
• How do supply-side policies affect unemployment?

  Create more job opportunities
• What is the primary objective of supply-side policies?

  Increase productive capacity
• What is the purpose of boosting productivity in supply-side policies?

  Improve labor and capital efficiency
• Supply-side policies aim to promote long-term economic growth by shifting the aggregate supply curve to the right.


  True
• An example of supply-side policy is tax cuts
• Supply-side policies lead to a decrease in unemployment
• A significant time lag can delay the impact of supply-side policies
• Reforms in the United Kingdom under Margaret Thatcher led to short-term higher unemployment.

  True
• Supply-side policies focus on increasing productive capacity, while demand-side policies focus on increasing aggregate demand.

  True
• What does deregulation aim to increase in businesses?

  Flexibility and efficiency
• Key objectives of supply-side policies

  1️⃣ Boosting productivity

  2️⃣ Enhancing flexibility

  3️⃣ Attracting investment
• Expansionary fiscal policy is an example of a demand-side policy.


  True
• Objectives of supply-side policies and their benefits

  1️⃣ Increase production efficiency: Improves resource allocation

  2️⃣ Enhance market flexibility: Enables quicker responses to economic changes

  3️⃣ Attract investment: Fosters innovation
• What is the objective of increasing production efficiency in supply-side policies?

  Improve resource allocation
• Reducing regulatory burden lowers costs for businesses and stimulates investment.


  True
• Demand-side policies focus on stimulating aggregate demand for short-term stabilization.


  True
• Increased productive capacity leads to higher potential output
• Factors limiting the effectiveness of supply-side policies

  1️⃣ Time Lag

  2️⃣ Complementary Policies

  3️⃣ Political Constraints
• Supply-side policies shift the aggregate supply curve to the right, while demand-side policies shift the aggregate demand curve to the right.


  True
• Match the type of supply-side policy with its description:

  Tax Cuts ↔️ Reduce taxes on income or profits

  Deregulation ↔️ Remove government restrictions

  Investment Incentives ↔️ Provide subsidies or tax credits

  Labor Market Reforms ↔️ Increase labor market flexibility
• Supply-side policies focus on long-term economic growth and lower inflation
• What does attracting investment foster in an economy?

  Innovation and capital accumulation
• Match the type of policy with its primary focus:

  Supply-Side ↔️ Increase productive capacity

  Demand-Side ↔️ Increase aggregate demand
• Supply-side policies increase economic growth by raising potential output.


  True
• Supply-side policies may require complementary demand-side policies to achieve desired outcomes.


  True
• What was a criticism of tax cuts implemented in the United States in the 1980s?

  Increased inequality
• Supply-side policies are government policies aimed at increasing the productive capacity of the economy.
• Examples of supply-side policies include tax cuts and deregulation.
• Investments in education and training are part of supply-side policies to improve workforce skills.
• What is the primary aim of supply-side policies in terms of the aggregate supply curve?

  Shift it to the right
• What is the primary focus of supply-side policies in terms of production?

  Efficiency and flexibility
• Supply-side policies focus on increasing the efficiency and flexibility of production.


  True