Understanding Supply Side Policies: Interventionist and Free Market Approaches

The video discusses supply side policies, which aim to enhance an economy's productivity by expanding the long-run aggregate supply (LRAS) curve. These policies are divided into interventionist and free market approaches. Interventionist policies involve government actions like education and infrastructure investments, while free market policies focus on reducing taxes and regulations to boost market forces. Despite their potential for sustainable growth, these policies face challenges such as long time lags and lack of immediate benefits, which can deter government investment.

What is the primary goal of supply side policies in an economy?

• To increase government spending

• To expand the long-run aggregate supply curve

• To reduce inflation

• To decrease the money supply

Which of the following is an example of an interventionist supply side policy?

• Reducing corporation tax

• Lowering interest rates

• Deregulating industries

• Implementing education and training programs

How do large infrastructure projects contribute to an economy's productivity?

• By increasing government debt

• By decreasing consumer spending

• By enhancing the transport and communication sectors

• By reducing the workforce

What is a key characteristic of free market supply side policies?

• They aim to reduce consumer demand

• They encourage market forces to operate freely

• They focus on increasing taxes

• They rely on government intervention

What is a major challenge associated with implementing supply side policies?

• Short-term economic contraction

• Long time lags before benefits are realized

• Immediate increase in inflation

• Decreased foreign investment