Supply-side policy
Introduced| English | Meaning |
|---|---|
| supply-side policy/səˈplaɪ saɪd ˈpɒlɪsi/ | Measures intended to improve an economy's productive capacity, efficiency or incentives to supply goods and services. |
| capacity/kəˈpæsɪti/ | capacity |
| productivity/ˌprɒdəkˈtɪvɪti/ | Output produced per unit of input over a given period. |
| investment/ɪnˈvestmənt/ | Spending on assets intended to provide future returns or increase productive capacity. |
| infrastructure/ˈɪnfrəstrʌktʃə/ | Basic facilities and networks, such as transport, energy and communications, that support economic and social activity. |
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:
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It increases what the economy can produce.
Supply-side policy raises the economy's productive ______.
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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.)
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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:
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Raising capacity grows output without the inflation of demand boosts.
Supply-side policies usually take a long time to have an effect.
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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