Supply-side policy
| English | Chinese | Pinyin |
|---|---|---|
| supply-side policy | 供给侧政策 | gōng jǐ cè zhèng cè |
| capacity | 产能 | chǎn néng |
| productivity | 生产率 | shēng chǎn lǜ |
| investment | 投资 | tóu zī |
| infrastructure | 基础设施 | jī chǔ shè shī |
Growing the economy's engine
- Fiscal and monetary policy push demand up or down. Supply-side policy 供给侧政策 does something deeper.
- It tries to raise what the economy can produce — its productive capacity 产能.
Economics case lab
Classify real examples by the economic idea they show.
Supply-side policy aims mainly to:
It increases what the economy can produce.
Supply-side policy raises the economy's productive ______.
It shifts the production possibility outward.
What supply-side policy is
- Supply-side policy = measures to raise productivity 生产率 and output capacity.
- It shifts the economy's whole production possibility outward over time.
Supply-side policy aims to raise the economy's productive capacity
Which are supply-side measures? (Select all that apply.)
Interest rates are monetary policy; the rest raise capacity.
The main measures
- Education and training → a more skilled, productive workforce.
- Lower business taxes and less red tape → more investment 投资.
- Infrastructure 基础设施 and competition policy → a more efficient economy.
A key advantage of supply-side policy is that it can:
Raising capacity grows output without the inflation of demand boosts.
Supply-side policies usually take a long time to have an effect.
Training and infrastructure pay off only over years.
Strengths and limits
- It can raise growth without causing inflation — the supply side, not just demand.
- But it is slow to work and can be expensive.
Supply-side ≠ demand-side. Fiscal and monetary policy manage demand; supply-side policy raises the economy's capacity to produce. They tackle different sides of the economy.
You've got it
- supply-side policy raises productivity and productive capacity
- tools: education/training, lower business taxes, infrastructure, competition
- it grows the economy without inflation, but works slowly