Download 17.1_SupplySidePolicies - econbus

Positive aspects
of Budget?
Negative
aspects of
Budget?
Homework due in
Budget review
Exam skills
Group
work
Group plan
Typical 14 mark Q….
• Examine how interest rate decisions may be
used to achieve the government’s inflation
target.
• Examine how tax rate decisions may be used
to achieve the government’s growth target.
• Examine how public sector spending may be
used to achieve the government’s debt target.
Essay template
….idea for structure
• You need pens
• An A3 sheet
• A question sheet
• You have 10 mins to
plan your answer.
Examine how interest
rate decisions may
be used to achieve
the government’s
inflation target.
Examine how tax
rate decisions may
be used to achieve
the government’s
growth target.
Examine how public
sector spending
may be used to
achieve the
government’s debt
target.
Supply Side policies
Aims / Syllabus
• To understand the concept of long term
trend growth
• To know different supply side policies
• To evaluate the effectiveness of supply
side policies.
How can you
push LRAS
curve out?
PPF & AD/AS links….
• Draw a PPF diagram
with unemployment
• Draw me an AD
LRAS diagram with
unemployment
How can you get to the
PPF curve?
Can you go beyond the
PPF?
What needs to happen in both scenarios
to reach Allocative efficiency?
So what are supply side policies?
• underlying long-run trend rate of
economic growth
• TREND RATE GROWTH….
Supply side policies aim to…
• Improve the efficiency of factor markets,
to boost productivity and hence the
overall capacity of the economy
• shifting long run aggregate supply
(LRAS) to the right
• and pushing out the PPF
Plan for Growth
• Current govt ‘The Plan for Growth’ includes a package
of measures to create a new model of economic
growth by achieving four overarching ambitions:
1. To create the most competitive tax
system in the G20;
2. To make the UK the best place in Europe
to start, finance and grow a business;
3. To encourage investment and exports as
a route to a more balanced economy; and
4. To create a more educated workforce
that is the most flexible in Europe.
Make your own notes
Education….
Training
Immigration
Gross Domestic Expenditure on R and D
% of GDP
Percentage of GDP
3.50
3.50
3.25
3.25
3.00
3.00
2.75
2.75
2.50
2.50
2.25
2.25
2.00
2.00
1.75
1.75
1.50
1.50
90
91
92
93
94
95
United Kingdom
Germany
96
97
98
99
00
01
02
03
04
05
06
EU-25
Finland
Source: Reuters EcoWin
Improved
technology
Corporation tax
• Further reading:
• http://cdn.hmtreasury.gov.uk/2011b
udget_growth.pdf
Govt Capital Investment
Innovation
Homework
Exchange Rate - SPICED