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Chapter 10: Supply Side Policies - Coggle Diagram
Chapter 10: Supply Side Policies
Market Oriented Policies
Pro-Competition Policies
Pro Competition or Anti-Monopoly legislation
Prevents agreements or practices that restrict competiton
Privatisation
Transfer of ownership from public (govt) sector to private sector
Corporatisation
Operations of areas of the public sector outsourced to private firms
Deregulation
Removal of monopoly rights in a particular industry
Outsourcing
Government contracts private firms using a competitive bidding process resulting in competitive deals to build or operate a project or provide certain goods and services
Free Trade and Capital Movements
Reduce trade restrictions
Manpower Policies
Reducing Power of Trade Unions
Reduces structural rigidities (trade unions often fight for higher wages)
Reducing Unemployment Benefits
Encourages long term unemployed people to find jobs
Reducing Government Expenditure
Releases more resources to the more competitive private sector
Tax Cuts
incentivise people to work more and harder
Interventionalist Policies
Information
Guidelines or information provided to influence wage, price or production decisions
eg. nominal wage guidelines may be issued to influence the rise in wage costs
Regulation and Legislation
Restrictions or laws that directly control the level of prices and output or influence the supply of factors of production
eg. foreign labour policies, legal working and retirement age
Incentives
The giving of incentives such as grants, subsidies and tax incentives
eg. procreation incentives
Urban Policy and Development
Intervene directly in the development of physical infrastructure and urban planning to maximise the benefit derived from the country's land space
eg. roads, railways
Effects on Macroeconomics Objectives
Reducing Unemployment
Market oriented AS policies reduce structural rigidities such as trade union and monopoly power, allowing price and wages to adjust more freely, hence shifting the SRAS downwards, increasing output and hence employment
Interventionalist policies such as promoting skills training reduce frictional unemployment
Controlling Inflation
Market oriented AS policies such as reducing the power of trade unions can help to control wage-price spiral, the increase in SRAS also reduces the GPL, keeping inflation in check
Interventionalist policies reduce COP and hence reduces SRAS, reducing GPL and keeping inflation in check
External Factor of Growth
By controlling inflation, encouraging innovation and improving productivity, AS policies make a country's exports more competitive. Domestic G&S may also become more competitive compared to imports, hence improving net exports
Promoting Economic Growth
By increasing both SRAS and LRAS curves, AS management policies stimulate economic growth