Supply-Side Policies in the UK Economy.

Supply-Side policies are used by the UK government to increase the long-term capacity of the economy. This helps to stimulate the long-run aggregate supply of the economy and therefore increase the potential output.

One of the key ways in which supply-side policies are used by the government, is through education and training. This is where workers who are out of work or unemployed have the opportunity to become more productive. This increases the labour productivity of the Uk, and as labour productivity is defined as being output per worker over time, the long run aggregate supply of the economy would increase (ceterus paribus). This can be useful as it helps to achieve many of the macroeconomic objectives set by the government. Firstly 'growth'. The increase of the potential output of the economy means that the UK economy would experience a stable rate of growth, similar to the target of the government. However, if the UK is not operating on it's production possibility frontier (PPF), then the long-term increase in potential output would have no effect on the economy as aggregate demand would not be sufficient and so the government would need to concentrate on stimulating aggregate demand.


BRAP

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