Supply-Side Effects Flashcards

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What are supply-side effects of fiscal policy?

They are how taxes and government spending change the economy's ability to produce goods and services.

To make workers and firms more productive, so the economy can produce more in the long run.

They raise take-home pay. This can encourage people to work, work more hours, or return to work.

If people keep more pay when they take a job, work pays. This can increase the number of people willing to work.

Help with childcare costs makes it easier for parents to work. More people can take jobs or work longer hours.

It builds skills. Higher skills raise productivity, so the economy can produce more.

Healthier workers miss fewer days and work better. Output per worker can rise.

Better roads and rail cut travel times and costs, so firms can move goods faster and produce more.

Firms keep more profit to invest in new machines and technology. Investment lifts productivity and capacity.

They encourage innovation. New ideas make production quicker or cheaper, raising output.

They reduce tax when firms buy new equipment, which encourages investment and expands capacity.

Training, health gains, and new roads take years. The boost to output appears later.