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Aggregate Supply Policies - Coggle Diagram
Aggregate Supply Policies
Aggregate Supply Policies:
To any Government initiative that is designed to reduce the costs of production and/or improve supply conditions for businesses so that Australia's productive capacity and LS are improved
AS + Eco goals
Low inflation:
The general level of prices to e rising 2 - 3% on average over time
when ^ productivity or productive capacity, can lead to an on average lower cost of production from businesses passed on as lower prices + reduction in cost inflation
SSEG:
Maintain the highest rate of growth possible without undue inflationary, environmental or external pressures
^ in productivity from
(research + development or education + training)
can lead to ^ in productivity capacity + productivity, leading ^EG
Full Employment:
The lowest rate of unemployment possible of 4 - 4.5% of NAIRU
Negative:
AS embedded - create structural unemployment, due to replacement of lower production costs
Positive:
^ productive capacity - firm employing more labour resources to maximise production
Living Standards:
Material living standard generally improve
Non-material living standard have both Post and Neg sides, due to over depletion of resources
International Competitiveness:
The degree to which Aus businesses are able to compete against other international businesses
^AS should - ^ competitiveness as average costs of production falls - reducing price levels or improve quality
Efficiency
Allocative Efficiency:
The most efficient allocation of all the nations resources in the way that provides maximum net benefits for Australians
Dynamical Efficiency:
The speed at which a nations firms are able to respond to the changing market (technology)
Technical Efficiency:
Producing maximum output with the given inputs at the lowest average cost possible
Inter-temporal Efficiency:
The right balance between resources being used in the current as opposed to the future use (extra tax, future fund, resource depletion
Budgetary Policies + Economic goals
Training + Education:
Improvement in quality of human capital
Low inflation
: ^ prod workforce - lower cost for business - fall in cost inflation
EG:
^ prod - higher output/lower cost of prices - higher productivity + Greater international comp
Full Employment:
^ employment of labour- ^inter Comp, creating demand for labour/reducing unemploy
Research + development:
Spend by Business for tech adva - increase quality/quantity
Low Inflation:
Better capital - lower aver cost/reducing cost infla
EG:
lower prices - ^ Inter Comp - ^ AD and creates non-inflationary EG
Full employment:
^demand for labour (short +long term) for ^ in inter Comp
Production:
A measure of the total G+S produced
Productivity:
A rate at which we turn our inputs into outputs. ^ productivity = ^ production
Productive Capacity:
The point at which production (or GDP) is occurring at max level possible
Quality + Quantity Factors:
Human Capital
Physical Capital
Natural Capital