What are supply side policies and how do they effect the economy?
Supply side policies focus on the production side of the economy which can be manipulated by taxes, regulatory policy or monetary policy (interest rates/ supply of money).
These policies are important for the government to control and adjust because it can help the growth and stabilisation of an economy. Supply side policies effect the aggregate supply curve by shifting it left or right - to shift the curve to the right (which is beneficial for the economy due to increased growth) you would employ policies such as a tax reduction, or decrease interests rates as this would encourage firms to invest in the economy. To illustrate this in an exam you would draw an AD AS diagram and shift AS to the right to show the impact of these policies.
LA
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