2.6.3 Supply-side policies

• Supply-side policies aim to increase the aggregate supply of the economy.
• Supply-side policies reduce inflation by shifting the aggregate supply curve to the right.
• Order the following supply-side policies by their primary focus:

  1️⃣ Education and Training

  2️⃣ Tax Reforms

  3️⃣ Deregulation

  4️⃣ Infrastructure Development
• Investing in vocational training is an example of a education and training policy.
• Reducing regulatory burdens on businesses is known as deregulation.
• Infrastructure development enhances connectivity and reduces transportation costs.
• Match the supply-side policy with its primary benefit:

  Education and Training ↔️ Higher wages, lower unemployment

  Tax Reforms ↔️ Economic growth, job creation

  Deregulation ↔️ Increased investment, competition

  Infrastructure Development ↔️ Enhanced connectivity and efficiency
• Education and training policies have a high initial cost and a significant time lag.
• Deregulation may lead to environmental risks or reduced worker safety.
• Tax reforms encourage investment and job creation by lowering corporation taxes.
• Infrastructure development supports economic efficiency and connectivity.
• Education and training policies lower unit costs by increasing workforce skills.
• Improved infrastructure reduces transportation costs and lowers inflationary pressures.
• Supply-side policies aim to reduce inflation by increasing the economy's aggregate supply.
• Match the supply-side policy with its primary objective:

  Education and Training ↔️ Improve workforce skills

  Tax Reforms ↔️ Incentivize work and investment

  Deregulation ↔️ Lower business costs

  Infrastructure Development ↔️ Enhance connectivity and efficiency
• Investing in skills and knowledge through education enhances workforce productivity.
• Lower corporation taxes encourage businesses to invest and create jobs.
• Lowering income tax rates stimulates investment and job creation.
• Education and training policies boost workforce productivity, leading to higher economic output.
• Supply-side policies are government strategies designed to increase the aggregate supply
• What is the impact of education and training on economic growth?

  Boosts workforce productivity
• Lowering income and corporation taxes stimulates investment and job creation
• Deregulation lowers business costs and encourages investment.
• How does infrastructure development contribute to economic growth?

  Enhances connectivity and efficiency
• Match the supply-side policy with its impact on economic growth:

  Education and Training ↔️ Higher economic output

  Tax Reforms ↔️ Creates more jobs

  Deregulation ↔️ Stimulates investment

  Infrastructure Development ↔️ Improves transportation costs
• What is the primary aim of supply-side policies in relation to inflation?

  Increase aggregate supply
• Education and training lower unit costs and increase aggregate supply.
• Education and training reduce the cost of producing goods and services, which lowers inflation
• How do supply-side policies affect unemployment?

  Reduce structural and cyclical unemployment
• Lower corporate taxes incentivize businesses to invest and create more jobs.
• What are some limitations of supply-side policies in reducing unemployment?

  High costs and long time lags
• Steps to evaluate the effectiveness of supply-side policies in the UK economy

  1️⃣ Analyze impact on economic growth

  2️⃣ Assess effect on inflation

  3️⃣ Examine influence on unemployment
• Education and training boost productivity and lower unit costs
• What is the impact of tax reforms on inflation?

  Boost supply and reduce inflation
• Deregulation enhances aggregate supply and reduces inflation by lowering business costs.
• How has vocational training in the UK affected structural unemployment?

  Reduced structural unemployment
• The effectiveness of supply-side policies depends on their implementation and the economic context
• Order the limitations and criticisms of supply-side policies:

  1️⃣ High Costs

  2️⃣ Long Time Lags

  3️⃣ Increased Income Inequality

  4️⃣ Ineffectiveness during Demand Shortfalls

  5️⃣ Environmental Concerns
• What is a key difference between supply-side and demand-side policies?

  Long-term vs. short-term focus
• Investing in vocational training programs increases the tax burden on taxpayers.