Question

A. What are two ways, other than tax cuts, a Supply-Side economist would advocate addressing a recession and shift the AS curve outward? Give an example of each. B. What are the three benefits of shifting the AS curve outward?

Answer 1

A) Supply side economist would advocate:

• They argue that government spending in economy will not help raising aggregate demand in the economy. They wants market to be flexible in reaching its equilibrium through invisible hand.
• These economist argue that changing the supply of money will not help economy in getting out from recession.

To reduce the recessionary gap through supply side policy, they will advocate:

• Reducing labor market regulation such that workers can operates without any hindrance.
• Reducing power of labor union.

B) Benefits of supply curve shifting right:

• Goods are available at lower prices
• More output is produced in an economy
• Ease in production process