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Supply-side policies

Supply-side policies

Supply-side policies aim at increasing potential output (the overall productive capacity) of an economy by increasing the quantity and/or quality of the factors of production, thus shifting the long-run aggregate supply (LRAS) curve to the right.

Market-based supply-side policies

They are intended to reduce government intervention to its minimum thereby allowing free market to increase efficiency and improve incentives.

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Interventionist supply-side policies

They presuppose that the free market economy cannot by itself achieve the desired results in terms of increasing potential output, and argue that government intervention in specific areas is required.

  • Investment in human capital
  • Investment in new technology
  • Investment in infrastructure
  • Industrial policies

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