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3 Cards in this Set
- Front
- Back
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Define supply side policy |
- Supply side policy aims to improve the economy's ability to produce more goods and services - They stimulate the economy to increase aggregate supply so that more goods and services are produced so that greater economic growth occurs |
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How does the government stimulate growth by using supply side policies? |
1. Increasing the efficiency of inputs,by encouraging the use of modern technology,better training of workers and reducing tax rates 2. Decreasing production costs(infrastructure services,wages,offer subsidies) 3. Making markets more efficient, increasing competition and removing unnecessary regulations |
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How the government can use the reduction of costs as a supply side policy? |
- Government can roll out measures that can reduce the costs of production, for example, modern infrastructure, efficient administration,less red tapes and no corruption
1. Infrastructure services - Transport, communication,water and energy costs often add substantially to the cost of the business - Government can make a significant contribution if charges are reasonable and services are efficient
2. Cash incentives - These includes subsidies for businesses to locate in neglected areas where unemployment is high and compensation to exporters for certain costs the incur in the development of export markets
3. Administration costs - These costs includes inspections, reports on the application of various laws, regulations and by-laws,tax return and returns providing statistical information. In South Africa business carry a heavy burden. |
