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Supply-side Policies · Paper 2 — Free Economics HL Practice Questions
1MasteryLAQObjectives of supply-side policies10 marksPaper 2~15 min
In 2023, the government of Vietnam introduced a series of supply-side policies to boost long-term economic growth:
- a reduction in corporate income tax for new technology start-ups
- significant government investment in vocational training centres in rural areas
- deregulation of the energy sector to allow private companies to build and operate solar farms
(a)
Explain how two of the measures above are designed to increase productivity in the Vietnamese economy. [2 marks]
(b)
Using a fully labelled AD/AS , explain how the combination of these three policies is expected to affect long-run aggregate supply (LRAS). [4 marks]
(c)
Evaluate the potential impact of these supply-side policies on two different stakeholders in the Vietnamese economy, considering both short-run and long-run effects. [4 marks]
Solutions
2MasteryLAQObjectives of supply-side policies10 marksPaper 2~15 min
In 2022, the government of Ghana implemented supply-side reforms to address a persistent current account deficit and high structural unemployment. The policies included:
(1) a reduction import tariffs on capital machinery used in manufacturing;
(2) a state-funded programme to retrain 50,000 workers from declining cocoa farming into the solar panel installation industry; and
(3) the privatisation of the state-owned telecommunications company.
(1) a reduction import tariffs on capital machinery used in manufacturing;
(2) a state-funded programme to retrain 50,000 workers from declining cocoa farming into the solar panel installation industry; and
(3) the privatisation of the state-owned telecommunications company.
(a)
Explain the mechanism by which improving international competitiveness could reduce Ghana's current account deficit. [2 marks]
(b)
Using a fully labelled production possibilities frontier (PPF) , explain how both the tariff reduction capital machinery and the worker retraining programme are each expected to contribute to an outward shift of Ghana's PPF. [4 marks]
(c)
Evaluate the likely effectiveness of all three policies in reducing Ghana's structural unemployment and current account deficit, considering the interests of different stakeholders. [4 marks]
Solutions
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