Unit 3.7 - Supply-side Policies

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foreign direct investment

Investment made by a company or individual in one country in business interests in another country. Supply-side policies can encourage this type of investment through tax incentives and subsidies aimed at enhancing the economy's productive capacity.

An individual or group with a personal stake in a policy.

A vested interest

environmental impact

The effect that economic policies have on the natural environment, which can be negative if growth policies lead to relaxed regulations or increased pollution.

export sales

The total value of goods and services sold to foreign markets, which can be influenced by supply-side policies that enhance productivity and competitiveness. Improved resource allocation and international competitiveness from these policies contribute to increased export sales, benefiting economic growth.

labour market reforms

Changes made to improve the efficiency of the labor market, which can sometimes lead to negative consequences for low-income workers if protections are reduced.

privatisation

The process of transferring ownership of a public sector enterprise to the private sector, which is examined for its potential to improve efficiency and reduce government expenditure.

Long-term government strategies aimed at enhancing the economy's productive capacity by improving the quality or quantity of production factors.

supply-side policies

The maximum possible national output if all resources are used efficiently.

Potential output of the economy

The reduction or removal of barriers to international commerce.

Trade liberalization

Labour market flexibility

The ability of the labour market to adjust to changes, such as wages and employment levels, which can enhance productivity and competitiveness. It aims to reduce unemployment and labour costs by promoting policies that minimize rigidities, such as minimum wage laws and union power.

Strategies implemented to boost growth in particular sectors of the economy.

Industrial policies

The physical and organizational structures and facilities necessary for the operations of society, including transportation and telecommunications networks.

Infrastructure

State the formula: AD (AD)

AD = C + I + G + (X - M) Aggregate demand equals consumption plus investment plus government spending plus net exports; government spending on interventionist policies increases the G component of AD.

Healthcare

The provision of medical services that is essential for improving the workforce's productivity, as better health reduces costs associated with employee illness and absenteeism.

Healthcare provision

The delivery of medical services and support to improve public health. Effective healthcare provision is crucial for maintaining a productive workforce, as it reduces costs associated with employee illness and enhances overall economic output.

Occupational mobility

The ability of workers to move between different jobs or occupations. Improved occupational mobility can reduce unemployment by matching job seekers with suitable positions, often facilitated by retraining programs and advancements in technology.

Training

Programs designed to enhance the skills and productivity of the workforce. Training is a key component of interventionist supply-side policies, aiming to improve human capital and increase labor mobility, thereby boosting economic productivity.

A direct tax levied on an individual's total earnings after specific allowances are taken into account.

personal income tax

A tax imposed on the profit gained from the sale of a fixed asset.

capital gains tax (CGT)

An organization that aims to protect the interests of its worker members, focusing on terms and conditions of employment, including pay and benefits.

Labour union

Laws that limit the market power of dominant firms.

Anti-monopoly regulation

Measures designed to enhance flexibility and efficiency in employment.

Labour market policies

Strategies designed to enhance motivation for employment by reducing taxation levels.

Incentive-related policies

Taxes imposed on profits from the sale of fixed assets.

Capital gains taxes

The removal of legal restrictions to promote market competition.

Deregulation

Labour union (trade union)

Organizations that represent workers' interests, focusing on improving employment conditions, pay, and benefits. They act as legal representatives for workers, influencing policies that affect their rights and working conditions.

Price caps

Regulatory limits set by the government on how much prices can increase, often used to prevent monopolies from charging excessively high prices. Price caps aim to protect consumers and ensure affordability in essential goods and services.

business tax

A type of tax levied on the profits of businesses, which can be reduced to create incentives for investment and economic growth, thereby increasing long-run aggregate supply.

dividends

Payments made by a corporation to its shareholders, typically from profits. Dividends represent a return on investment for shareholders and can influence investment decisions, as they indicate a company's profitability and financial health.

Government spending on education and healthcare

Expenditures by the government aimed at improving educational and healthcare systems. Such spending can enhance the productive capacity of the economy by increasing human capital and overall health, leading to long-term economic growth.

long run aggregate supply

The total output of an economy when all resources are fully employed, which is influenced by supply-side policies that enhance productive capacity over time.