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IAI Actuarial Core Principles · Business Economics · Impact of macroeconomic policies on businesses

Which supply-side measure is an example of a market-oriented approach rather than an interventionist approach?

Privatising a state-owned enterprise and opening its sector to competition is market-oriented. It relies on private ownership and competitive pressure to raise efficiency. The other options involve the state directly providing or funding training, research, infrastructure or property, which is the interventionist approach.

  1. APrivatising a loss-making state-owned enterprise and exposing its sector to competitionCorrect
  2. BDirect government funding of a national research laboratory
  3. CState-run apprenticeship schemes for infrastructure projects
  4. DGovernment-built industrial parks offered to firms at subsidised rents
  5. Public investment in a national highway network

Explanation

Market-oriented policies rely on competition and incentives, such as privatisation, deregulation and tax cuts. The other options involve direct state provision or funding of training, infrastructure or research, which are interventionist supply-side measures.

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