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  • Policies that aim to increase the productive capacity of the economy by increasing the stock of the FofP or their productivity

increase in the productive capacity = long run growth

Labour (increasing stock of resources)

Immigration increases labour supply

Structual UE: mismatch of skills/ geographical immoblity. Reduced by education/ training or relocation programmes.

Frictional UE: reduced by decreasing welfare payment (decreases search time for work)

Voluntary UE: reduced through cutting welfare (encouraged to work) or cutting tax rates (income from employment incease = incentivising work over welfare)

cutting taxes will increase labour supply (laffer curve)

these policies will cause unemployment to reduce, leading to eco growth

Capital: increasing capital stock comes from investment



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