Practise Cambridge IGCSE Economics by defining supply-side policy, identifying its productive-potential aim and distinguishing it from monetary policy.
Some countries engage in dumping by selling their products at less than cost price in Cambodia. The Cambodian Government wants the country to become a high-income economy by 2050. It uses fiscal, monetary and supply-side policies to increase its economic growth rate. Cambodia subsidises some infant industries. The country has one of the world's largest deficits on the current account of its balance of payments (as a percentage of GDP). Some economists suggest cutting taxes would reduce this deficit.
Explain two differences between monetary policy and supply-side policy.
Explain two differences between monetary policy and supply-side policy.
Logical explanation which might include the following.
- Monetary policy is usually implemented by the central bank (1) supply-side policy by the government (1).
- Monetary policy may be used to increase or reduce economic activity (1) supply-side policy is only used to increase economic activity (1).
- They have different policy measures (1) e.g. monetary policy has the rate of interest whereas supply side policy has privatisation (1).
- Monetary policy aims to influence total demand (1) supply-side policy aims to increase total supply (1).
- Supply side policies tend to take longer to implement and have an impact (1) than monetary policy which tends to have a more short -term impact (1).
4
If more than two differences are given, consider the first three.