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Level 11

Supply-Side Policies


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Supply-side policies
Governments attempts to shift aggregate supply to the right by 'making life easier for firms' or increasing capacity or efficiency in the economy by other means.
Education and training
Spending on education and training to increase productivity, innovation etc.
Health spending
Spending on health to reduce absenteeism etc.
Deregulation
Removing barriers to competition in a market to encourage efficiency.
Removing 'red tape'
An informal term to refer to some firms of regulation that remove onerous bureaucracy from firms.
Reducing trade union power
Reducing unions ability to strike and bargain for higher pay, thus reducing firms' costs and also days lost to strike action.
Reducing the minimum wage
Reducing firms wage costs by lowering the amount they legally have to pay workers.
Privatisation
The selling of government owned firms into the private sector via a share flotation. This, it is hoped, will increase their efficiency when they are incentivised by the profit motive.
Time lags
The time delay between the imposition of a policy and its full effect on aggregate supply.
Cutting taxes
This can have both demand and supply side effects. Cutting income and corporation tax should increase workers' incentives to work more hours and firms' incentives to increase production.
Tax breaks
These can be used to incentivise spending on training or investment. Firms can keep more tax if they can establish they have spent it on items used to increase capacity and productivity.