Supply Side Policies

• Supply side policies aim to boost the productive capacity of the economy and increase long run aggregate supply.
• Examples of supply side policies include improving education and training, making changes to the tax and benefit system, implementing industrial policies, and adopting migration policies.
• Supply side policies can promote sustained long run economic growth, increase employment, and keep inflation under control, but they may take years to see their full benefits and can be costly.

Supply side policies are government actions aimed at increasing the productive capacity of the economy and long run aggregate supply. These policies can include improving education and training to enhance the quality of labor, making changes to the tax and benefit system to incentivize work, implementing industrial policies to encourage private sector investment, and adopting migration policies to increase the size of the labor force. These policies shift the economy’s production possibility frontier outward, allowing for increased economic growth, employment, and inflation control. However, the benefits of these policies may take years or even decades to fully materialize, and they can be costly, requiring consideration of opportunity costs. Overall, supply side policies offer a way to promote sustained economic growth while avoiding the trade-offs associated with demand side policies.