Supply side policies

• Supply side policies are measures intended to improve long term productive potential through efficient and investment, by focusing on shifting AS outwards.
• Interventionist policy - government increases its intervention in the economy

  More infrastructure spending lowers transport costs increasing SRAS

  Reducing tax and NMW increases labour supply and demand

  Guaranteeing more bank loans encourages more business start ups
• Supply side policies can be shown by an outwards shift of SRAS which increases GDP
• Market based policy - government decreases its Intervention in the economy allowing the market to work more freely

  Less tax means lower business costs, increasing SRAS

  Privatisation encourages profit and efficiency motive

  Lower tax also means more consumption

  Reducing borrowing increases investment (crowding effect)
• Improving productivity through supply side policies helps cut costs and inflation

  Fewer policies can also help better growth and a better Balance of Payments and employment
• However, supply side policies can take years to have an effect.

  Some policies may be expensive, increasing national debt

  Higher taxes can widen inequality