A-Level - Supply-side Policy

What is an aim of supply-side policy?

• A. to increase the country’s productive potential

• B. to increase the price level

• C. to reduce aggregate demand

• D. to reduce employment

In what circumstance may a supply-side policy measure actually cause a reduction in aggregate supply?

• A. government spending on education increases labour productivity

• B. infrastructure development increases competition and efficiency

• C. improvements in training result in some workers gaining jobs abroad

• D. technological improvement leads to an increase in investment

When is a supply-side policy likely to be least effective in increasing the quantity of goods and services the country produces?

• A. The economy is operating a mixed economic system.

• B. The economy is operating with considerable spare capacity.

• C. The government has a budget surplus.

• D. There is flexibility of resources.

Which policy measure may be regarded to be both a fiscal policy measure and a supply-side policy measure?

• A. a cut in bank lending

• B. a cut in the interest rate

• C. a reduction in government spending

• D. government spending on investment

What is a difference between infrastructure development and training as supply-side policy tools?

• A. Infrastructure development aims to decrease aggregate supply, whereas training aims to increase it.

• B. Infrastructure development first increases capital productivity, whereas training first increases labour productivity.

• C. Infrastructure development has no impact on the tax revenue a government receives, whereas training reduces it.

• D. Infrastructure development’s main focus is to reduce competition, whereas training’s main focus is to increase competition.

Is a supply-side policy tool designed to achieve a reduction in cost-push inflation and a reduction in structural unemployment?

• A

• B

• C

• D

What may reduce the need for a government to subsidise training by the private sector?

• A. a decrease in educational standards

• B. a decrease in labour turnover

• C. an increase in structural unemployment

• D. an increase in the speed of technological change

In which circumstance is technological improvement most likely to result in a rise in productivity?

• A. It is accompanied by a fall in wages.

• B. It is accompanied by a rise in working hours.

• C. It results in a decrease in long-run planning.

• D. It results in an increase in competition.

Which change is a supply-side policy not designed to achieve?

• A. a budget surplus to a budget deficit

• B. a recession to economic growth

• C. high inflation to price stability

• D. high unemployment to low unemployment

What is likely to reduce the effectiveness of supply-side policy?

• A. high mobility of factors of production

• B. high global aggregate demand

• C. the introduction of contractionary fiscal policy

• D. the removal of tariffs on imported raw materials