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What are supply side policies?

Supply-side policies are those government policies which aim at positively affecting the production side of an economy by improving the institutional framework and the capacity to produce (that is, by changing the quantity and/or quality of factors of production).

In short it involves all measures taken by the government for improving the productive potential of the economy.

Supply-side policies may be market-based or interventionist and that in either case they aim to shift the LRAS curve to the right, achieving growth in potential output.

shift of supply curve

neo classical LRAS movement of right

 

 

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