Once the idea that changes in output could be produced at constant prices began to be questioned the role of demand management as the main instrument of macroeconomic policy also became subject to question Perhaps the economy could be managed by policies directed towards supply side. Total or aggregate supply is derived the combination of the factors of production by firms and supply side policies are policies directed towards altering the response of these factors to demand. Of course. many supply side policies cost money to introduce and arc therefore closely linked with demand management policies through the government budget constraint (sec Chapter 3. section 3.3.1). For example. an increase in labour retraining schemes would increase both government expenditure and the PSBR given the level of taxation. Hence aggregate demand would be increased both through the increase in government expenditure and the probable monetary expansion due to the increase in the PSPR. T be a "pure" supply side pohey an offsetting increase in government revenue would be necessary so that aggregate demand remained unchanged. In the this could be achieved by an increase taxation .In practice of ease of exposition we will ignore any impact on aggregate demand in the following discussion.