Evaluate the use of supply side policies as a means of controlling UK inflation (30 marks)

Definition:

Firstly, one must define supply side policies: requires the aggregate supply curve to move to the right - measuring an increase in the factors of production (eg, land, capital); increase in productivitiy. (diagram can illustrate)

Knowledge and Expanation:

UK inflation can be managed, and by this, reduced, by encouraging the quantity of supply to increase. This can be acheived in various ways. Firstly, increasing inward migration which would have the effect of increasing the supply of labour and thereby creating compeittion for jobs at many levels. As a result, this increase in labour creates a downward pressure on price. Also, the government can encourage entrepreneurship (analysis follows as per the afore) or provide subsidies or a tax relief to incentivise investment. Latterly, subsidies have the effect of lowering the cost of production for producers, thereby reducing price. 

Evaluation - 50% of the answer:

1. TIme lag impacts the effectiveness of the measure in increasing productivity. For example, increasing spenditure on Education and its impact can only be measured across a period of time.

2. Inflation may conflict with another Government policy to: reduce unemployment, reduce taxation.

3. Alternative policies: demand-side measures. This has high relevance in present day economic conditions.