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IAI Actuarial Core Principles · Business Economics · Supply-side policies and their impact on businesses

Which of the following is an example of an interventionist supply-side policy?

Government funding of a national skills programme is interventionist, because the state directly spends to raise labour productivity and correct under-provision of training. The other options deregulate, cut taxes or privatise, which are market-based supply-side policies relying on incentives rather than active state provision.

  1. AReducing the top marginal rate of income tax to encourage work effort
  2. BGovernment funding of a national skills programme to train workers in data and digital skillsCorrect
  3. CAbolishing restrictions on the hiring and dismissal of employees
  4. DPrivatising a state-owned telecommunications operator
  5. Reducing the power of trade unions through legislation

Explanation

Interventionist supply-side policies involve the government actively correcting market failures, for example by funding training or infrastructure. The other options reduce state involvement or free up markets, so they are market-based policies. Funding a skills programme is direct government action to raise labour quality.

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