Question

Consider the following list of government policies.

i. welfare programs ii. student loans

iii. lower income tax rates iv. progressive income tax rates

v. unemployment compensation vi. tax credits for research and development

Which are examples of supply-side fiscal policies?

Answer 1

Answers are (ii), (vi)

Supply side policies increase the productive capacity in the Economy, by changing supply side factors , rather than demand side things.

So spending on education, infrastructure, technology, corporate tax cuts , increasing investment & reduce regulations are all supply side fiscal policy.

Student loans enhance level of education in society , thus insures availability of skilled Labor in industry . Hence supply side policy

Tax credit for R & D enhance the knowledge & skills level, hence significantly contribute towards raising productive potential.

Income tax rate is a demand side factor, hence changes in income tax rates is demand side policy.

Unemployment compensation & welfare programs provide disincentive to work