Econs - 4.4

Question 1

supply side policy

Answer 1

long-term measure to increase the productive capacity of the economy, leading to an outward shift of the productive possibility curve

Question 2

7 supply side policy measures

Answer 2

1. education & training
2. labour market reformed
3. lower direct taxes
4. deregulation
5. incentives to work
6. incentives to invest
7. privatisation

Question 3

education and training - measures

Answer 3

• improves education & training in economy => better skills => increased productivity, flexibility & mobility => higher output

Question 4

labour market reforms

Answer 4

• makes it easier for firms to hire & fire workers to create more job opportunities

Question 5

lower direct taxes - measures

Answer 5

• reduce corporation & income tax => encourages workers to work more

Question 6

deregulation - measures

Answer 6

• reduces rules / barriers on businesses
• makes it easier for new firms to start & existing businesses to expand => more competition => higher efficiency / out put to survive

Question 7

incentives to work

Answer 7

• low direct tax => more income => more incentive to work
• low indirect tax => cheaper prices => increased spending => economic growth => more jobs

Question 8

incentives to invest - measures

Answer 8

• lower cooperation tax => businesses pay less tax on profits => able to use that money for improvements / expansion
• inflation & interests rates are predictable & low => invest confidently

Question 9

privatisation

Answer 9

• sold from public to private sector
  -to be run more efficiently
• increases competition and productivity => helps economys output

Question 10

effects of supply-side policy measures on macroeconomic aims

Answer 10

1. economic growth - increases productive capacity
2. low unemployment - training => increases in ppc => increase national output
3. low inflation (price stability) - higher efficiency => lower production costs => less inflation
4. BOP - currency drops => exports become cheaper => people buy more
5. redistribution of income - higher productivity => raises income => more jobs BUT if jobs only go to skilled workers it will widen