IAI Actuarial Core Principles · Business Economics · Supply-side policies and their impact on businesses
Which of the following is a market-based supply-side policy, as distinct from an interventionist supply-side policy?
Privatisation of a state-owned insurance company is market-based because it moves ownership to private hands and exposes the firm to competition and profit incentives. The other options involve government spending or provision of training, infrastructure and research, which are interventionist supply-side policies.
- AGovernment funding of a national apprenticeship scheme
- BPublic investment in a new highway network
- CPrivatisation of a state-owned insurance companyCorrect
- DSubsidies for research and development in universities
- Direct state provision of vocational training centres
Explanation
Market-based policies aim to free markets and increase competition, for example through privatisation, deregulation and weaker trade unions. Funding training, infrastructure and R&D involves active government spending, which is interventionist. Privatisation transfers ownership to the private sector to improve efficiency.
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