supply side policy

Supply side policy is the is the branch of polcies that considers how to improve the Productive
capacity of the economy.
Lower Inflation:because it can make the price level go down , which is the AS shift left,so it can help
the cost push inflation

Lower Unemployment: if supply increase they need more labour.therefore , the company may
want to recruit more people.

Improved economic growth:AS increase , AD increase , leading to economic growth.Improved
trade and Balance of Payments. By making firms more competitive they will be able to export
more. This is important in light of the increased competition from S.E. Asia.

Reducing Taxes.It is argued that lower taxes (income and corporation) increase incentives for
people to work harder, leading to more output.However this is not necessarily true,

lower taxes do not always increase work incentives ( A2 e.g. if income effect outweighs substitution effect)

Increased education and training
Better education can improve labour productivity and increase
AS.Often there is under provision of education in a free market, leading to market failure.
Therefore the govt may need to subsidise suitable schemes.However govt intervention will cost
money, requiring higher taxes, It will take time to have effect and govt may subsidise the wrong
types of training

Reducing the power of Trades UnionsThis should
a) increase efficiency of firms
b) reduce unemployment

Reducing State Welfare Benefits
This may encourage unemployed to take jobs.
Providing better informationmay also help reduce frictional unemployment,and they may do
not want to change their job.
Deregulate financial markets to allow more competition and lower borrowing costs for
consumers and firms.