Unit 3.7 - Supply-Side Policies
What you need to know and understand:
Key concepts:
Concepts to understand:
- Goals of supply-side policies
- Long-term growth by increasing the economy’s productive capacity
- Improving competition and efficiency
- Reducing labour costs and unemployment through labour market flexibility
- Reducing inflation to improve international competitiveness
- Increasing firms’ incentives to invest in innovation by reducing costs
- Long-term growth by increasing the economy’s productive capacity
- Market-based policies, including:
- policies to encourage competition, such as:
- deregulation
- privatization
- trade liberalization
- anti-monopoly regulation
- deregulation
- labour market policies, such as:
- reducing the power of labour unions
- reducing unemployment benefits
- abolishing minimum wages
- reducing the power of labour unions
- incentive-related policies, such as:
- personal income tax cuts
- cuts in business tax and capital gains tax
- personal income tax cuts
- policies to encourage competition, such as:
- Interventionist policies, including:
- education, training
- improving quality, quantity and access to health care
- research and development
- provision of infrastructure
- industrial policies
- education, training
- Demand-side effects of supply-side policies
- Supply-side effects of fiscal policies
- Effectiveness of supply-side policies
- Constraints on supply-side policies
- Market based—equity issues, time lags, vested interests, environmental impact
- Interventionist—costs, time lags
- Market based—equity issues, time lags, vested interests, environmental impact
- Strengths of supply-side policies
- Market based—improved resource allocation, no burden on government budget
- Interventionist—direct support of sectors important for growth
- Market based—improved resource allocation, no burden on government budget
- Strengths and limitations in promoting growth, low unemployment, and low and stable rate of inflation
- Constraints on supply-side policies
Key concepts:
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Concepts to understand:
- Government intervention attempts to achieve macroeconomic objectives through a choice of policies.
- Political, economic, social and environmental factors are interdependent and will influence the effectiveness of government policies.
TEXTBOOK unit 3.7
|
|
|
|
|
|
|
|