Supply Source Policies HARRIET BENNETT

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  • Supply side policies
    • Privatisation
      • selling state owned assets to the private sector. private sector is more efficient at running a business as they have a profit motive to reduce costs & develop better services.
    • Deregulation
      • involves reducing barriers to entry in order to make a market more competitive
        • competition leads to lower prices and better quality of goods/ services.
      • e.g. BT used to be a monopoly but now telecommunications is quite competitive
    • Reducing income taxes
      • lower taxes increases the incentive for people to work harder, leading to more output.
        • However, this isn't always true, lower taxes do not always increase work incentives.
    • Increased education and training
      • Better education can improve labour productivity and increase aggregate supply.
        • the under-provision of education in a free market which leads to market failure. So the government needs to subsidies suitable education and training schemes.
          • However, government intervention will cost money, requiring higher taxes. it will take time to have effect and the government may subsidies the wrong type of training
    • Reducing the power of Trade Unions
      • By increasing efficiency of firms (less time lost to strikes) and reduce unemployment (if labour markets are competitive)
    • Reducing State Welfare Benefits
      • therefore, encouraging people to take jobs
    • Providing better information about jobs
      • This may also help reduce frictional unemployment
    • Deregulate financial markets
      • to allow more completion and lower borrowing costs for consumers & firms
    • Lower Tariff barriers
      • this will increase trade
    • Improving transport and infrastructure
      • Due to market failure this is likely to need government intervention to improve transport & reduce congestion.
    • Deregulate Labour Markets
      • an important objective for the EU to increase competitiveness
        • e.g. make it easier to hire and fire workers.


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