Question 1

Supply- side policies are government policies

Accepted Answer

Supply-side policies are designed to increase the productive capacity of the economy and shift the aggregate supply curve to the right, focusing on factors that influence the production and costs in the economy over the long term.

Question 2

An important instrument of supply- side policy has been the

Accepted Answer

D

Question 3

Proponents for supply- side policies argue that the best way to increase the supply of goods and services is

Accepted Answer

Supply-side policies aim to increase productivity and efficiency in the economy, primarily through stimulating the supply of labor and capital and increasing investment. This approach focuses on creating a favorable environment for businesses to grow and for the economy to expand, rather than directly controlling prices or increasing government production.

Question 4

According to supply- side economists, as tax rates are reduced, labour supply should increase. This implies that

Accepted Answer

The substitution effect of a wage change being greater than the income effect implies that as wages increase (due to lower taxes), individuals are more inclined to work more because the opportunity cost of not working (leisure) becomes higher. This aligns with supply-side economics, which suggests that lower tax rates can lead to an increase in labor supply.

Question 5

Tax breaks designed to encourage investment in new technology are an example of

Accepted Answer

Tax breaks designed to encourage investment in new technology are an example of a supply-side policy, which aims to increase productivity and shift the supply curve to the right by incentivizing investment and innovation.

Question 6

A supply- side policy such as ______is not likely to be suggested by a Keynesian, whereas the supply- side policy of ______	would be suggested by a Keynesian.

Accepted Answer

Keynesians focus on demand-side policies to stimulate economic growth and are less likely to advocate for benefit cuts, which are a supply-side measure aimed at increasing labor supply. However, they would support tax credits for investment projects to stimulate demand and investment.

Question 7

What effect will a successful supply- side policy have on the production possibility curve?

Accepted Answer

A successful supply-side policy, which aims to increase the productive capacity of the economy, will cause the production possibility curve to shift outward. This indicates an increase in the potential output of goods and services.

Question 8

Reducing the level of government expenditure, while at the same time adopting a tight monetary policy to reduce inflation, proved to be difficult. Which of the following helps to explain why this was so?

Accepted Answer

The deflationary monetary policy would lead to a slowdown in economic activity, which in turn would trigger automatic fiscal stabilizers such as increased government spending on unemployment benefits and reduced tax revenues. These stabilizers would counteract the government's efforts to reduce expenditure, making the policy difficult to implement.

Question 9

Which of the following beneficial supply- side effects is not claimed to occur following cuts in the marginal rate of income tax?

Accepted Answer

The answer of Which of the following beneficial supply- side...

Question 10

What effect will a successful supply- side policy have on the aggregate demand curve?

Accepted Answer

The answer of What effect will a successful supply- side...

Question 11

An increase in the level of benefit paid to an unemployed person would

Accepted Answer

Increasing the level of benefit paid to an unemployed person effectively reduces the opportunity cost of not working, making it less financially pressing for the individual to find a job quickly. This can be seen as reducing the cost of job search because the individual can afford to spend more time looking for a job without facing immediate financial hardship.

Question 12

Which of the following statements supports deregulation of industries?

Accepted Answer

All the statements support deregulation by highlighting the negative impacts of regulation or the lack of need for it due to changes in technology and the rarity of natural monopolies.

Question 13

The Private Finance Initiative uses______to deliver public projects and services.

Accepted Answer

The Private Finance Initiative (PFI) is a way of creating public-private partnerships by funding public infrastructure projects with private capital. Thus, it primarily involves the private sector in delivering public projects and services.

Question 14

Which of the following describes indicative planning?

Accepted Answer

Indicative planning involves a process where the government, businesses, and unions collaborate to align their policies and plans, aiming for economic coordination without direct command over production levels or nationalization of industries.

Question 15

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

Accepted Answer

Increased government expenditure on transport infrastructure is an example of interventionist supply-side policy because it involves direct government action to improve the productive capacity of the economy.

Question 16

A key supply- side policy is to make sure that workers are well trained. Which of the following is true?

Accepted Answer

The UK spends a smaller percentage of its GDP on training compared to comparable countries, which is a concern for enhancing the skills and productivity of its workforce.

Question 17

Deindustrialisation refers to

Accepted Answer

Deindustrialisation refers to the decline in the manufacturing sector's contribution to a country's economy, often accompanied by a shift towards the service sector.

Question 18

Of the following possible reforms to the National Health Service (NHS), which were adopted by the 1990s Conservative governments in the UK?
  (i) Devolution of responsibility for the provision of health care from regional authorities to hospital trusts
(ii) General practitioner budget holders purchasing services directly from hospitals on behalf of their patients
(iii) The introduction of charges to patients for consulting their NHS doctors
(iv) Greater competition between hospitals

Accepted Answer

The 1990s Conservative governments in the UK adopted reforms that included devolving responsibility for health care to hospital trusts (i), allowing general practitioners to hold budgets and purchase services (ii), and promoting greater competition between hospitals (iv). They did not introduce charges for consulting NHS doctors (iii).

Question 19

Which of the following is not one of the causes of regional imbalance in the UK?

Accepted Answer

EC policy is not a direct cause of regional imbalance in the UK. Regional imbalances are more directly influenced by factors such as regional multiplier effects, capital immobility, and labour immobility, which affect economic growth and distribution within the country. EC (European Community) policies might impact the UK in various ways, but they are not a primary cause of regional imbalance within the country itself.

Question 20

A way of helping depressed regions by having wage subsidies, lower business taxes and capital subsidies has been suggested by

Accepted Answer

Centre-left economists often suggest policies like wage subsidies, lower business taxes, and capital subsidies to help depressed regions. These measures are aimed at stimulating economic activity and employment in areas that are lagging behind.

Quiz 31: Supply-Side Policy