Economics, 3rd Edition

758  PART 14  SHORT-RUN ECONOMIC FLUCTUATIONS

SUMMARY

 

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Supply-side policies became a focus of many govern-

ments in the 1980s and into the 1990s.

 

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The focus is on policies designed to shift the AS curve 

to the right.

 

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Shifting the AS curve to the right can lead to sus-

tained economic growth which increases national 

income but keeps prices stable countering the pro-

duction bottlenecks that can occur if the focus is 

on increasing aggregate demand through fiscal or 

 monetary  policy.

 

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Supply-side policies can take two main forms – 

 market-orientated policies or interventionist policies.

 

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Market-orientated policies are designed to free up mar-

kets so that they allocate resources more effectively 

and efficiently.

 

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Interventionist policies are designed to improve the 

working of the market and which require government 

intervention to overcome the public good element of 

the investment in infrastructure education, training and 

research and development.