Supply side policies aim to increase the productive potential of an economy through policies like: - Improving education to increase workforce productivity and quality - Cutting taxes to encourage more labor supply and investment - Deregulation and privatization to increase business efficiency While classical economists favor free market supply side policies, Keynesians argue for a more interventionist approach, and both schools of thought disagree on the best way to implement such policies to shift aggregate supply outward over the long run.

1. Supply Side Policies

2. What Are they?
• Supply Side Policies are policies which are
designed to increase the ‘productive
potential’ of an economy
• They tend to be associated with the right
of the political spectrum
• However governments of any colour may
use them!

3. What do they set out to do
• They hope to
achieve an
increase in Long
Run Aggregate
Supply
• As shown in the
diagram

4. What is a supply side policy
• Improvements to Education
– Increases productivity and quality of the
Labour force
• Tax Cuts
– Encourages an increase in supply of labour,
incentive to work
• Cuts to Corporation Tax
– Attempts to stimulate investment from
business

5. What is a supply side policy
• Deregulation
– Aims to increase efficiency as business
spends more time doing business than red
tape
• Privatisation
– Makes firms more efficient as they are ruled
by Market Forces, inefficient firms go out of
business
• Cutting Benefits
– Encouragement to work

6. What is a supply side policy
• Curbing powers of Trade Unions
– If power is reduced it lowers demands for
wage rises and makes workers more flexible
in working

7. Evaluation of Supply Side Policies
• SSPs will alter the economy in the long
term
• Classical and Keynesian Economists
disagree on the approach to them
• Classical Economists want a free market
approach
• Keynesians look for a more
interventionist approach