Supply Side Policies
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Transcript of Supply Side Policies
Supply Side Policies
What Are they?
• Supply Side Policies are policies which are designed to increase the ‘productive potential’ of an economy
• They tend to be associated with the right of the political spectrum
• However governments of any colour may use them!
What do they set out to do
• They hope to achieve an increase in Long Run Aggregate Supply
• As shown in the diagram
What is a supply side policy
• Improvements to Education– Increases productivity and quality of the
Labour force
• Tax Cuts– Encourages an increase in supply of
labour, incentive to work
• Cuts to Corporation Tax– Attempts to stimulate investment from
business
What is a supply side policy
• Deregulation– Aims to increase efficiency as business
spends more time doing business than red tape
• Privatisation–Makes firms more efficient as they are
ruled by Market Forces, inefficient firms go out of business
• Cutting Benefits– Encouragement to work
What is a supply side policy
• Curbing powers of Trade Unions– If power is reduced it lowers demands
for wage rises and makes workers more flexible in working
Evaluation of Supply Side Policies
• SSPs will alter the economy in the long term
• Classical and Keynesian Economists disagree on the approach to them
• Classical Economists want a free market approach
• Keynesians look for a more interventionist approach