Explain how fiscal stimulus might be used to bring about supply-side improvements in the UK economy.

Begin by defining fiscal policy and a supply-side improvement (the latter should be supplemented with a diagram). Following the definition of a supply-side policy, we might begin with examples of fiscal policies that affect the economy's aggregate supply curve. An example particularly pertinent to the UK economy would be spending on education. This would shift the AD curve out (note multiplier effect), but also shift the aggregate supply curve out as UK workers become more productive and unit labour costs fall. The best answers might elude to the fact that this will further shift out the AD curve as exports increase as they become more competitive in foreign markets.