Supply side policies aim to increase aggregate supply by deregulating markets and helping firms become more efficient. This can increase growth, employment, exports, and reduce imports and inflation. Supply side policies move the aggregate supply curve to the right. Examples of supply side policies include education and training, reducing laws and regulations for businesses, reducing welfare payments, and privatization and deregulation. However, supply side policies are often expensive, slow to work, and can benefit high earners at the expense of others.

1. Supply Side Policies

2. Objectives of this module:
To understand what is meant by ‘supply side policies’
To appreciate how supply side policies work
To be able to give 5 examples of supply side policies
To understand the limitations of supply side policies

3. Supply Side Policies
Inflation
Unemployment
Growth
Imports
Exports
Reduce
Budget
Deficit Interest rates
Exchange rates
Printing money
(quantitative easing)
Government spending
Taxation
Helping free markets
to work more
efficiently

4. Supply side policies aim to:
Increase aggregate supply by de-regulating markets and helping firms
become more efficient.
Increase aggregate supply by stimulate competition to drive down prices
and improve quality.
Which may affect the real economy by:
Increasing growth and living standards
Increasing employment
Increasing exports
Reducing imports
Reducing inflation

5. Output
Price level
AD
P1
Q1
AS
P2
Q2
AS1
Supply Side Policies aim to:
Move the aggregate supply curve to the right

6. 5 Supply Side Policies
1. Education and training
Improve education and training so we have a well
educated, productive and flexible workforce.
Evaluation
These policies
are expensive
and very slow
to work

7. 5 Supply Side Policies
2. Reduce laws and regulations faced by business (red tape)
Recruitment, health and safety, hiring and firing, minimum
wage regulations, working hours, maternity rights……
Evaluation
These policies
may lead to the
exploitation of
workers

8. 5 Supply Side Policies
3. Reduce welfare payments
Reduce unemployment benefits
Make it more worthwhile for unemployed to look for work
Take steps to stop the ‘poverty trap’
Evaluation
These policies
will only
work if jobs
are available

9. 5 Supply Side Policies
5. Privatisation and deregulation
Private sector firms can be more efficient than public
sector organisations.
Evaluation
There’s not
much left to
privatise.
Health and
education?

10. Review:
Supply side policies aim to increase AS in an economy
In theory they can increase growth without increasing inflation
There are many examples of supply side policies
They are often very slow to work, not very effective, they can
be expensive and are often seen as unfair as they benefit high
earners at the expense of the less well off.

11. Multiple choice questions:
Which of the following is not a supply side policy?
a) Cutting job seekers allowance
b) Expanding university courses in technology
c) Lowering interest rates
d) Allowing private firms to run prisons
Find the answer to this question at: www.istudypacks.com/supply-side

12. Multiple choice questions:
Unlike demand-side economics, supply-side economics:
a) advocates reduced government involvement in business
b) advocates increased government involvement in business
c) try to increase consumer purchasing power
d) urges higher taxes to reduce the budget deficit
Find the answer to this question at: www.istudypacks.com/supply-side

13. Essay Question:
Discuss the importance of supply side policies in
improving the performance of the UK economy.
Find a model answer to this question at: www.istudypacks.com/supply-side