supply-side

• what are supply side policy's

  policy's taken by the government to increase aggregate supply
• why is supply side policy beneficial

  as it lowers inflation and increases economic growth
• why don't we only use supply side policy

  on their own they can have little impact and take lots of time to work
• can supply side policy decrease AS

  no as this only has negative effects higher inflation and lower real GDP
• what's is a supply side improvement

  an increase in aggregate supply but not due to government intervention
• how can supply side policy lead to a supply side improvement

  government actions influences private sector activity. e.g. tax reliefs cause increases in research and development which can lead to increases in productivity
• how is lowering national insurance a supply side policy

  it increases the incentive to work as by lowering national insurance it means economically inactive people are more likely to work reducing real unemployment and the tax burden created by benefits
• how can subsidising childcare be a supply side policy

  subsidising childcare costs can encourage economically inactive people back into work increasing the supply of labour
• how does lowering corporate taxation effect supply side factors

  1. lowering national insurance increases the incentive to create jobs

  2. lowering corporation tax can increase long run aggregate supply as there are more profits available allowing firms to increase dynamic efficiency
• how does increasing the minimum wage affect AS 


  -removes the poverty trap and encourages people to work

  -can decrease the number of jobs available due to higher costs for firms
• what is a free market supply side policy

  a policy that reduces government intervention - supply and demand determines outcomes
• what is an interventionalist supply side policy 


  where governments interfere in the market to obtain a more optimal outcome
• what are the 5 free market supply side policies 


  -tax cuts

  -privatisation

  -deregulation

  -labour market reforms

  -cutting benefits
• how are tax cuts a free market policy

  -cuts for firms increases the profit incentive and therefore supply

  -personal cuts increase the supply of labour
• how is privatisation a free market policy

  the newly privatised business now has a profit incentive so becomes more efficient. this increases national output
• how is deregulation a free market policy

  allows for greater market efficiency
• what are labour market reforms

  makes it easier for firms to employ and get rid of workers
• how is labour market reforms a free market policy

  less workers rights means employment is more flexible for firms so they may create more jobs in times of boom
• how is cutting benefits a free market policy 


  increase the supply of labour allowing for truer market outcomes in terms of output
• what are the 5 interventionalist supply side policies

  -spending on education/training

  -government spending on infastructre

  -increasing the minimum wage

  -industrial policy

  -subsidising research and development
• how is spending on education/training interventionalist

  improves skills and productivity increasing out put and correcting market failure of the under provision of education and training
• how is spending on infrastructure interventionalist

  would reduce costs and allow for efficiency correcting the failure that the private sector may nor provide these
• how is increasing the minimum wage interventionalist

  this increase the supply of labour increasing output as well
• how is industrial policy interventionalist

  supporting a market with subsidies or tax relief in order to promote growth and employment in sector. corrects under provision of positive markets for the national economy
• how is subsiding research and development interventionalist

  increases the incentive to perform research and development thus improving productive potential of the economy