Assignment 2

Put it in WRITING....!!
75% of the solution to a problem
is within the problem itself

UNDERSTAND the Problem completely

 Assignment 2
• What am I required to do in this assignment?

• You will investigate a real and current issue within the field of
macroeconomics and must demonstrate that you can structure a
study on a macroeconomics subject, identify information needs,
draw from the body of existing knowledge on a particular subject,
compare theory with practice, construct reasoned arguments
supported by evidence, and make logical conclusions, all within a
context of an individual written report, and strict deadlines

• For this assessment, you are required to critically evaluate the

major supply-side policies which could be used by a government
and their aims, by further debating the extent to which supply-
side policies have been successful in improving the performance
of a country’s economy of your choice.
• What do I need to do to pass?
• In order to pass Assessment 2 you will need to:
• • Demonstrates knowledge of market structure
in the macroeconomic field and awareness of
current evidence and issues.
• • Research the relevant literature in order to
identify patterns of different economic
behaviour, compare the various points of view
and develop own perspective.
• • Present evidence of economic behaviour in a
clear and concise way
• How do I produce high quality work that merits a
good grade?
• Assessment of a student’s work in a particular task is
a judgement of the extent to which the student has
attained the unit’s learning outcomes (ULO) covered
by that task. To begin with understanding what the
assigned question is about, is essential.
• Students need to demonstrate that understanding the
course content, can expand upon their existing
knowledge and go above and beyond the expected
standard.
• In order to produce high quality work that merits a
good grade, the students should clearly demonstrate
a critical and sophisticated understanding of the
topic, with a high degree of competence and have
excellent usage of relevant literature, theory and
methodology.
• Unit learning outcomes
• 1. Demonstrate a deep and systematic
understanding of the way an economic system is
structured, the economic theoretical and
methodological approaches and the outcome of
their applications.
• 2. Develop critical responses to existing economic
theoretical disclosures, the structure of our
economy and the behaviour of economic entities,
and be able to decompose economic models to
critically apply them to real economic situations,
evaluates their effectiveness.
• Making mental notes of what you have to do

• you are required to critically evaluate

the major supply-side policies which could be
used by a government and their aims, by
further debating the extent to which
supply-side policies have been
successful in improving the
performance of a country’s economy of
your choice.
• How much time do I have?
• Till the 20th of May, 2021

• How much do I have to write?

• 3000 words

• What area of information should I mainly

focus on?
• Introduction 15% - economic policies that
grabs interest of the reader and states topics,
clear structure, well-developed, a definitive
statement
• Literature Review 40% - economic policies of
the country chosen is exceptionally
researched, reviewed articles relating to the
argument in a logical manner, correctly cited
• Analysis & Discussion 20% - Exceptionally
critical, relevant and consistent connections
made between evidence and theory
• Conclusion 15% - Excellent summary of
argument with concluding ideas that impact
the reader, introduces new information,
• Referencing & Citation 10% - no errors in
Harvard style references and citations

• Breo website gives you help in Academic

Writing, but you can research about that also
a bit before you start writing.
• What are Supply-Side Policies ?

• Supply-side policies are government attempts

to increase productivity and increase
efficiency in the economy.
• If successful, they will shift aggregate supply
(AS) to the right and enable higher economic
growth in the long-run.
• There are two main types of Supply-Side
Policies (SSP):
• 1. Free-Market SSP

• 2. Interventionist SSP
• Privatization: Selling state owned assets to
the private sector.
• Deregulation: Reducing barriers to entry to
allow new firms to enter the market.
• Tax cuts: Increase spending
• Deregulate Labor Markets: Flexible rules
• Deregulate Financial Markets: low borrowing
cost
• Reducing the power of trade unions: Increase
efficiency, reduce real-wage unemployment
• Reducing unemployment benefits:
Encouraging employment
• Increase free-trade: Frictionless trade deals
can lead to lower cost for business and
improve productivity.
• Interventionist Supply-Side policies:

• Increased Education and Training: Better

labor productivity
• Improve Transport and Infrastructure: Reduce
transport cost and geographical immobility.
• Improved Housing: Easier to match the needs
of employees which would provide easy
access to labor
• Improved Healthcare: Reduce cost and
increase productivity
• Why SSP and why not DSP (or Keynesian)?

• According to World Economic Forum reports, the

key global challenges are:
• Food Security
• (By 2050 the world must feed 9 billion people)
• The 2nd of its 17 Sustainable Development Goals
(SDGs) for the year 2030 is “Ending hunger,
achieving food security and improved nutrition”
• Agriculture sectors have to be more productive
• Growth should be inclusive (deregulations)

• (There is evidence that the current social,

economic and political systems are increasing
the inequalities rather than reducing them
and the research shows that rising income
inequalities is one of the main causes of
economic and social ills, ranging from low
consumption to social and political unrest)
• Have to increase employment
• (61 million jobs have been lost since the start of
the financial crisis in 2008 and estimated 500
million jobs are needed by next year)

• Address the Technology advancement

• (Within the next decade, it is expected that more
than a trillion sensors will be connected to the
internet. By 2025, 10% of people are expected to
be wearing cloths connected to the internet and
the first implantable mobile phone is expected to
be sold.
• Making the Healthcare fit for the future

• (Health system will have to be capable of

taking care of 9 billion people by 2050. More
than 2 billion will be over the age of 60.)
• Those are just few ideas to think about in
explaining the importance of implementing
SSPs.
• Limitations of SSP:

• Productivity growth depends on private

enterprise and trends in technological
innovations
• Possibility of being counter-productive
(flexible labor markets might reduce job security
demotivating the worker which will reduce the
productivity)
SSP will not tackle the lack of Aggregated Demand
during a recession.
SSP take a long time to have an effect.
• The Other side of the Coin:
• Demand-Side Policies (DSP) : Consumer
demand for goods and services (consumer
spending) is the key driver for economic
growth
• If the aggregated demand is decreasing then it
is the responsibility of the government to
intervene and stimulate the economy to
increase the demand
• Most interesting part of all this:
• SSP expect that the increased supply will
influence the consumer to demand more

• Ronald Reagan who was the President of the

US from 1981 to 1989 successfully used SSP to
improve the economy of the country which
came to be known as “Reagonomics”.
• Reduced taxes for the wealthy
• Deregulation
• Reduced government spending
Were the main concepts he followed.

He brought the inflation down from 12.5% to 4.4%

and the average annual GDP growth during his term
was 3.6%.
At the end of his 8 years as the President his
approval rating was at 68%, matching those with
Franklin D. Roosevelt and Bill Clinton, the highest
for a departing president in the US history.
• Supply-Side Economics is better known to
some as “Reagonomics” or the “trickle-down”
economy.

• The idea is that great tax cuts for wealthy

investors and entrepreneurs will provide them
with incentives to save and invest and
produce economic benefits that trickle down
to the rest.
• He said “ a riding tide lifts all boats”.
• Three pillars of SSP:
• Tax cuts
• Deregulation
• Money circulation

• This has been explained by Say’s Law in

economics in the 19th century.
• Say’s Law
• Say’s law states that the production of goods
creates its own demand.
• In 1803, John Baptiste Say explained his
theory.
• “It is worthwhile to remark that a product is
no sooner created than it, from that instant,
affords a market for other products to the full
extent of its own value.” (J. B. Say, 1803:
pp.138–9)
• Implications of Say's Law of Markets

• The greater the number of producers and a variety of

products in an economy, the more prosperous it will
be. Conversely, those members of a society who
consume and do not produce will be a drag on the
economy.
• The success of one producer or industry will benefit
other producers and industries whose output they
subsequently purchase, and businesses will be more
successful when they locate near or trade with other
successful businesses. This also means that
government policy that encourages production,
investment, and prosperity in neighboring countries
will redound to the benefit of the domestic economy
as well.
• The importation of goods, even at a trade
deficit, is beneficial to the domestic economy.

• The encouragement of consumption is not

beneficial, but harmful, to the economy. The
production and accumulation of goods over
time constitutes prosperity; consuming
without producing eats away the wealth and
prosperity of an economy.
• Good economic policy should consist of
encouraging industry and productive activity
in general, while leaving the specific direction
of which goods to produce and how up to
investors, entrepreneurs, and workers in
accord with market incentives.