AS Flashcards
(16 cards)
What causes a movement along the AS curve?
Only changes in the price of the good itself
What causes a shift in AS?
Increase in factors of production
What does SRAS show?
The total goods and services in the economy in regards to their price( general price level)
What does LRAS show?
the relationship between price level and real GDP that would be supplied( the total national output)
What shifts SRAS?
C-costs
E-exchange rates
R-“ “
T-Tax
What shifts LRAS?
Changes in quantity or quality of FOP, or increase productive efficiency (LR cost of production for biz., due to spending , HS2)
What are supply side policies?
Policies designed to increase the productive capacity of the economy , shifting LRAS to the right
What are some interventionist supply policies?
-Government spending on education and training
-Government spending on infrastructure
-Subsidies to promote investment
What are some market-based supply side policies?
- Tax reforms (lower income tax, corporation)
-Labour market reforms (reduced benefits, reduced minimum wages, reduced trade union power) - incentives to work and increase output
-Competition policy (privatisation, deregulation, trade liberalisation)
What are some evaluation / (cons) for supply side policies?
-no guarantees
-cost
-time lag
-negative stakeholder impacts (environment)
-output gaps
-need for targeted S.S.P
Advantages of privatisation?
-allocatively efficient
- reduced x-inefficiency (reduction in waste to remain competitive)
-efficiency incentive for profit (=> dynamic efficiency)
What are disadvantages of privatisation?
-limited competition (productive and allocatively inefficient/complacency)
-May reduce welfare (ie , loss making services)
-Loss of natural monopoly and economies of scale
What does the success of privatisation depend on?
-level of competition (lack of competition=privatisation)
-level of government intervention
What is the positives of nationalisation?
-Greater economies of scale
-More focus on service provision
-Less likely to be market failures
-Area to achieve macroeconomic objectives
What are negatives of nationalisation?
-Diseconomies of scale
-Lack of incentive to minimize costs
-Wasteful production
-Lack of supernormal profit
-Highly expensive/burden on the tax-payer
-High prices due to lower competition
-Greater risk of morale hazard (policy makers making nationalisation decesions)
-Political priorities override commercial issues
What are evaluative points of nationalisation?
-Funding / delivery
-Public/Private partnerships?
-Role for regulation instead
-Level of competition in the private sector
-Size of firm/objectives
