Supply-side policy
Cambridge IGCSE Economics (0455) · Unit 4: Government and the macroeconomy · 8 flashcards
Supply-side policy is topic 4.5 in the Cambridge IGCSE Economics (0455) syllabus , positioned in Unit 4 — Government and the macroeconomy , alongside Government role in economy, Macroeconomic aims and Fiscal policy. In one line: Supply-side policies are government attempts to increase the productive capacity of the economy. An example is government investment in education and training programs to improve the skills of the workforce.
This topic is examined in Paper 1 (multiple-choice) and Paper 2 (structured questions, including data-response items).
The deck below contains 8 flashcards — 3 definitions, 4 key concepts and 1 application card — covering the precise wording mark schemes reward. Use the 3 definition cards to lock down command-word answers (define, state), then move on to the concept and application cards to handle explain, describe and compare questions.
'supply-side policy' and provide an example
Supply-side policies are government attempts to increase the productive capacity of the economy. An example is government investment in education and training programs to improve the skills of the workforce.
Questions this Supply-side policy deck will help you answer
- › Explain how improved education and training can impact the aggregate supply curve.
- › How does privatisation aim to improve economic performance?
- › Explain how tax incentives can be used as a supply-side policy.
- › Discuss one potential drawback of supply-side policies.
- › Explain how reducing unemployment benefits could act as a supply side policy.
Define 'supply-side policy' and provide an example.
Supply-side policies are government attempts to increase the productive capacity of the economy. An example is government investment in education and training programs to improve the skills of the workforce.
Explain how improved education and training can impact the aggregate supply curve.
Increased education and training boost labour productivity and efficiency. This leads to a greater quantity of goods and services produced at each price level, shifting the aggregate supply curve to the right.
What is meant by 'deregulation' as a supply-side policy?
Deregulation involves reducing or removing government regulations in an industry. This can lower business costs, encourage competition, and increase output, shifting the AS curve to the right.
How does privatisation aim to improve economic performance?
Privatisation transfers ownership of state-owned enterprises to the private sector. It introduces profit incentives, encourages efficiency, and can lead to greater investment and innovation, expanding AS.
Define 'labour market flexibility' and give an example of how to achieve it.
Labour market flexibility refers to the ease with which labour can be hired, fired, and wages adjusted. Reducing the power of trade unions is one way to increase labour market flexibility.
Explain how tax incentives can be used as a supply-side policy.
Tax incentives, such as lower corporation tax rates, can encourage investment and entrepreneurship. This leads to increased production capacity and a rightward shift of the aggregate supply curve.
Discuss one potential drawback of supply-side policies.
Many supply-side policies take a long time to implement and show results.
Explain how reducing unemployment benefits could act as a supply side policy.
Reducing unemployment benefits incentivizes people to actively seek employment, increasing the available labour force. This leads to greater potential output and a rightward shift of the AS curve.
Key Questions: Supply-side policy
Define 'supply-side policy' and provide an example.
Supply-side policies are government attempts to increase the productive capacity of the economy. An example is government investment in education and training programs to improve the skills of the workforce.
What is meant by 'deregulation' as a supply-side policy?
Deregulation involves reducing or removing government regulations in an industry. This can lower business costs, encourage competition, and increase output, shifting the AS curve to the right.
Define 'labour market flexibility' and give an example of how to achieve it.
Labour market flexibility refers to the ease with which labour can be hired, fired, and wages adjusted. Reducing the power of trade unions is one way to increase labour market flexibility.
More topics in Unit 4 — Government and the macroeconomy
Supply-side policy sits alongside these Economics decks in the same syllabus unit. Each uses the same spaced-repetition system, so progress in one informs the next.
Cambridge syllabus keywords to use in your answers
These are the official Cambridge 0455 terms tagged to this section. Mark schemes credit responses that use the exact term — weave them into your answers verbatim rather than paraphrasing.
Key terms covered in this Supply-side policy deck
Every term below is defined in the flashcards above. Use the list as a quick recall test before your exam — if you can't define one of these in your own words, flip back to that card.
How to study this Supply-side policy deck
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