Practise shifting LRAS after supply-side measures, reading output, price and employment effects and evaluating short-run AD pressure against long-run productive gains.
Discuss whether supply-side policies are likely to be effective in increasing employment in an economy.
- analysis of potential benefits of supply-side policies to increase employment in an economy, using appropriate examples (up to 4 marks)
- analysis of potential limitations of supply-side policies to increase employment in an economy, using appropriate examples (up to 4 marks)
(AN: up to 8 marks)
- assessing whether supply-side policies are likely to be effective in increasing employment in an economy - it is possible that such policies might actually increase unemployment (up to 3 marks); and a concluding comment (1 mark)
(EV: up to 4 marks)
12
Possible benefits of supply-side policies:
- Privatisation of firms to make them more efficient, leading to an increase in employment
- Increased spending on education and training to increase labour productivity and so increase employment
- Lower corporate taxes can leave firms with more money to spend on employing more workers
- Subsidies may be provided, encouraging firms to increase employees
- Policies to make the labour market more flexible may lead to an increase in employment
- Policies to encourage competition, leading to an increase in employment
- Financial support to encourage spending on R&D, leading to an increase in employment
Possible limitations of supply-side policies:
- May be expensive to implement
- Can take a long time to take effect, e.g. policies on education and training
- Privatisation could actually lead to an increase in unemployment.