CHAPTER 40: SUPPLY SIDE POLICIES (SSP)

INTRODUCTION Does FP & MP affect AD. or AS? *Do Getting started p 181 SSP’s are used to ↑ AS. in an economy, i.e. ↑

the supply of G & S. How could the productive capacity (PPC or

AS) of an economy be improved? Brainstorm

1. LABOUR MARKET REFORMS The govt. tries to ↑ the productivity of labour

by;1. Improve flexibility by ↓the strength of

trade unions no ‘closed shops’ i.e. no compulsory

membership secret ballots allowed no fixed wages ( MW)2. Restore incentives: i.e. ↓ income tax so

people want to work more3. ↑ the quality of labour; i.e. better

education & training. Also ↑ females & elderly workers

*Do Q 1 P.183

2. PRODUCT MARKETS The govt. tries to ↑ the efficiency of G & S

production by;1. Privatisation (see ch. 29)2. Deregulation: less rules, laws so doing

business is easier, e.g. airlines3. Helping small firms by ↑ competition, ↓

monopoly/ oligopoly (review: benefits of competition Ch. 22)↓ taxes for themTax allowances for small business investorsFree advice service

* Do Q2 P184

3. CAPITAL MARKETS i.e. the market for investment. Stocks & bonds.

Where firms & the govt. can raise capital. The government can do any of the following to

↑ investment in a country1. Invest in infrastructure e.g. transport,

communications, to make doing business easier

2. Having a stable economy, i.e. no booms/ busts, so firms are sure about future

3. ↑ education/ training

SOME MEASURES TAKEN BY UK GOVERNMENT IN REGARDS TO THE CAPITAL MARKET

↓ co. tax as a lot of investment is made from profits

Let firms offset investment spending against tax

Tax relief for individuals investing in shares

https://www.youtube.com/watch?v=8uMo-zib4jo (6:00)

Exam practice