Supply-Side Policies Flashcards
What are supply-side policies
Policies that improve productive potential / capacity in an economy - illustrated by an outward shift of LRAS (or the PPF)
What are market-policies designed to do
To make markets work better and give the private sector more freedom
What do supply-side reforms affect
Can affect both short-run and long-run AS - but the focus is usually on LRAS
Time lags with supply-side reforms
Can be long
Main objectives of supply-side policies
- incentives to work
- increase investment and R&D
- non inflationary growth
- encourage new businesses
What macro objectives does a stronger supply-side performance allow a government to meet
- improvement in Philips curve conflicts
- flexible to shocks
- raise living standards + reduce unemployment
- competitiveness
What are interventionist supply-side policies
State (government) driven supply-side policies
What do supporters of interventionist supply-side policies argue
That an interventionist state can have s powerful and positive long-term effect on supply-side performance
Examples of interventionist supply-side policies
- state investment
- min wage
- higher taxes on the wealthy
What is human capital a measure of
Individuals’ skills, knowledge, abilities and health attributes etc.
How can human capital in the U.K. be improved
- education
- training
- inflow of migrants
What is R&D
Focused on the creation and improvement of producers and processes, based on scientific research - applied to market needs
Biggest barriers to innovation
- risk aversion
- uncertainty about firm’s ability to exploit research profitability
- lack of high-skilled workers in key research industries
What is innovation
Putting a new idea of approach into action
What is product innovation
Small-scale, frequent subtle changes to the characteristics and performance of a good or a service
