Introduction to Supply Side Policy

What is a key distinction between supply side and fiscal policy?

• Supply side policy focuses on expenditure.

• Fiscal policy is primarily concerned with reducing taxes.

• Supply side policy involves creating incentives to work and invest.

• Fiscal policy aims to increase productive capacity.

How does fiscal policy potentially affect inflation?

• By causing an aggregate demand shift.

• By increasing long-run aggregate supply.

• By reducing productive capacity.

• By decreasing aggregate demand.

What is a characteristic of supply side policy?

• It is synonymous with fiscal policy.

• It focuses on changing economic rules to encourage production.

• It primarily involves government spending.

• It relies on increasing taxes.

Which approach is typically associated with a free market in supply side policy?

• Heavy regulation and state intervention.

• Market-driven initiatives with minimal regulation.

• High taxes and large state sector.

• Government-led economic planning.

What is a common misconception about supply side policy?

• It involves direct government expenditure.

• It focuses on incentives and regulations.

• It is unrelated to fiscal policy.

• It decreases productive capacity.

How can a reduction in income tax be viewed from a supply side perspective?

• As a way to discourage work.

• As a purely fiscal policy measure.

• As an initiative to increase disposable income.

• As a means to encourage labor participation.

What is the primary goal of supply side policy?

• To increase government revenue.

• To enhance the economy's ability to produce goods and services.

• To reduce inflation through monetary policy.

• To decrease aggregate demand.