ACCA Applied Knowledge · Business and Technology · Macroeconomic factors
Which of the following is an example of supply-side policy rather than demand-side policy?
Funding vocational training programmes to improve workforce skills is a supply-side policy. Supply-side measures aim to raise productive capacity and efficiency, such as through training and education. Interest rate changes, government spending and tax rate changes mainly work by altering aggregate demand.
- AReducing the base interest rate
- BIncreasing government spending on hospitals
- CFunding vocational training programmes to improve workforce skillsCorrect
- DRaising the rate of value added tax
Explanation
Supply-side policies aim to increase the productive capacity and efficiency of the economy, for example through education, training and removing barriers to enterprise. Interest rate changes, government spending and tax changes mainly influence aggregate demand.
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