Discuss the effectiveness of supply side economics in improving the performance of the UK economy. Supply side economics is very effective on a long run basis, but may not be as good on a short run

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ECONOMICS HOMEWORK

Discuss the effectiveness of supply side economics in improving the performance of the UK economy.

Supply side economics is very effective on a long run basis, but may not be as good on a short run. This means to improve the economy through competition between firms and markets, to increase efficiency and flexibility through labour and production and also to improve all macro tradeoffs. The effect all this will have on the AS curve is that the AS curve will shift to the right, showing that supply increases and inflation decreases. Also now more jobs will be available which means that the unemployment level will decrease.

Supply side economics can do a lot good for the future generations, in a long run, but it may cause problems in a short run. In order to increase competition companies and firms would need to be privatised and deregulated, so that monopolist companies would have to face competition. Deregulation will force these monopolies into competition which will allow economic growth to improve. Also by having competition between the different companies will cause inflation to decrease as people would be now able to buy the same good or service but from a different and may be a cheaper company. This means that companies will need to reduce their prices in order to stay in the market or they will be shifted out of business.

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The bad side to supply side economics is that in a short run if companies can’t afford to lower their prices or if they can’t cope the competition then they may close down, which means employees will become redundant and unemployment may increase. Also this means that people who don’t have many skills other then mining or working in steelworks etc may not be able to get a job anywhere else unless they are taught new skills.

Problems like this can also be good for the economy as the old industries or ones who can’t cope with the ...

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The essay has a poor structure as it goes straight into evaluation. There needs to be a progression from knowledge and understanding, to analysis and then evaluation. There is no clear conclusion in regards to answering the question of how effective supply side policies are. Sometimes the language used is colloquial such as "this is really bad for the economy". I would've liked to have seen more technical terms used, and this is mostly due to the lack of analysis. Spelling, punctuation and grammar are fine.

The essay has poor analysis but good evaluation. It needed to include an explanation of one supply side policy. This could've been increased investment in education and training, which increases the levels of skills of the labour force after education, thus increasing productivity. I would've then shown this on an aggregate demand and aggregate supply diagram as a shift right of aggregate supply. This then allows a discussion of the effect on real GDP and the price level, leading to an explanation of how it affects employment. Unfortunately, this mechanism is not explored in this essay! I liked how this essay shows clear awareness that supply side policies are poor in the short-term. However, this essay lacks a discussion of the effectiveness. A simple sentence stating "in the short-term supply-side policies aren't effective" would have gained marks. I would've liked to have seen some more sophisticated discussion such as "the effectiveness depends upon how targeted the investment in education and training is". Without any diagrams, it is difficult to hone in on good analysis and so this essay sometimes goes off focus.

This essay jumps in a bit quickly to the question. I would've liked to have seen an introduction discussing what UK performance means in macroeconomic terms: inflation rate, unemployment rate, growth. There is no discussion of what a supply side policy is, or how they work. This means that this essay is short in analysis but has plenty of evaluation. I would note that in an exam, it clearly states that evaluation cannot be awarded if there is no analysis, and so this essay would score poorly.