supply-side

• what are supply side policy's

  policy's taken by the government to alter AS
• 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 AS 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 increased in research and development
• how does national insurance become a supply side policy

  changes the incentive to work - lowering the national insurance means economically inactive people are more likely to work
• how can subsidies be a supply side policy

  subsidizing childcare costs etc can encourage economically inactive people back into work
• how does lowering corporate taxation effect supply side factors

  -lowering national insurance increases incentive to create jobs

  -cooperation tax lowering can increase LRAS due to better investment
• 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