Discuss the importance of Supply Side policies
The main macro economic objectives of the government include:
- Higher economic Growth
- Low inflation
- Low Unemployment
- Equilibrium on the balance of payments
Quite often these objectives conflict with each other. For example, expansionary fiscal policy may contribute to higher economic growth and lower unemployment; however, it will be at the cost of inflation and a deterioration on the current account.
To achieve all objectives simultaneously it is essential to improve the supply side of the economy. If the government can increase productivity and shift AS to the right, it can enable low inflationary growth.
