Skip to content

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

Which statement about the distinction between market-based and interventionist supply-side policies is correct?

Market-based supply-side policies seek to strengthen incentives and competition, for example through deregulation or privatisation. Interventionist policies use government action to correct market failures, such as underprovision of infrastructure, training or research. Both aim to raise productive capacity.

  1. APrivatisation and deregulation are interventionist, while state-funded training is market-based
  2. BBoth types rely entirely on cutting interest rates
  3. CMarket-based policies aim to improve incentives and competition, while interventionist policies use government action to correct market failures such as underinvestment in infrastructure or trainingCorrect
  4. DInterventionist policies always reduce the role of the state in the economy
  5. Market-based policies are demand-side, and interventionist policies are supply-side

Explanation

Market-based policies such as deregulation, privatisation and tax cuts rely on incentives and competition. Interventionist policies, such as public funding of infrastructure, education and R&D, address market failures directly. Both types are supply-side, and the first option reverses the classification.

Did you get it right without looking?

One question tells you little. A timed set on Supply-side policies and their impact on businesses shows your real accuracy, how long you take and where you lose marks.

Practise Supply-side policies and their impact on businessesFree diagnostic mock

More Supply-side policies and their impact on businesses questions