Unit 3.7 · Supply-side Policies
Supply-side Effects of Fiscal Policies
AO2
Syllabus Requirement
Fiscal tools such as targeted spending and tax cuts can boost productive capacity over time.
Assessment Objectives
AO2Application and Analysis
Summary
Supply-side policies aim to enhance the productive capacity of an economy over the long term. While these policies can have immediate effects on aggregate demand through government spending, their impact on potential output typically takes longer to materialize. Understanding these dynamics is essential for analyzing fiscal policy in IB Economics.