AS Modelled Answer: Evaluate the use of a supply side policies to achieve economic growth.

Using an AS/AD diagram evaluate the use of a supply side policies to achieve economic growth.

A decrease in the National Minimum wage may cause a fall in the cost of production for many firms across the UK (1m) causing AS to shift RIGHT (1m). The consequence of this is some firms may expand as they become more profitable causing recovery, a quarterly rise in Real GDP after a recession (Y1-Y2) (1m) In the long term firms may relocate to the UK if they believe that the UK is a low cost economy, shifting PPF outwards i.e increasing potential output/trend growth. (1m)

4 marks - explain a supply side policy

4 marks evaluate

However the size of the recovery may not be that significant if the fall in the NMW is not that SIGNIFICANT  (2e) or does not affect many people (MAGNITUDE/SCALE)(2e). also workers may become poor, demotivated, leave the labour market or even the UK so  UK productivity falls and national output falls. (2e)