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2.5 Fiscal policy and supply-side policies

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Question 24

The diagram below shows a rightward shift in an economy's Long-Run Aggregate Supply curve from LRAS1 LRAS_1\,LRAS1​ to LRAS2LRAS_2LRAS2​, increasing full-capacity national output from Y1 Y_1\,Y1​ to Y2Y_2Y2​.

AD-AS Diagram

Which of the following government policies is most likely to achieve this shift through an interventionist supply-side channel?

Lowering the rate of corporation tax to encourage private sector capital investment

Deregulating the domestic banking sector to increase competition and credit availability

Increasing state funding for vocational apprenticeships to address structural skill shortages

Raising the value of out-of-work welfare benefits to support low-income families

2.5 Fiscal policy and supply-side policies Questions

  1. A Level
  2. /Economics
  3. /2.5 Fiscal policy and supply-side policies