This is government policy to influence the total amount of goods and services which are produced in a country over a given period of time. This level of production is also referred to as aggregate supply.
Generally speaking, governments want to increase aggregate supply with policies which are favourable towards businesses and investors. The aim is to make running businesses easier and cheaper, leading to higher and more efficient levels of production in specific industries or across the whole economy.
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Key terms:
Subsidy – money which is given by the government to producers in order to encourage the production of particular goods and services.
Output – the amount of something which is produced.
Productivity – a way of measuring the efficiency of production. It is the amount which is produced with given resources.