Supply Side Flashcards
Define supply side policies
Policies to improve the ability of the economy to provide goods and services by increasing the quality/quantity of the factors of production
Examples of supply side policies
Privatisation —> increase in output as private sector more efficient in running businesses
Deregulation —> reduce barriers to entry, encourages more suppliers and firms to set up
Deregulate labour markets —> more flexible so reduces RW u/e
Education and training —> better productivity and reduced structural unemployment
Reduction in income tax + corp (carrots and sticks) —> increases incentives to work and encourages FDI + extra retained profit
Reduction in u/e benefits —> lowers NRU
Infrastructure improvements —> lower costs
Examples of when supply side policies may not work
Recession —> reflationary policies needed
Law of unintended consequences/gov failure—> e.g. education is a merit good so benefits not seen in short run
Government may be ill-directed of what type of policies needed
U/e may be cyclical/demand deficient
