Supply-side policy includes:
A) A decrease in the discount rate.
B) An increase in taxes.
C) An increase in spending on infrastructure.
D) A decrease in the required reserve ratio.

Question

Quizplus · Accepted Answer

Supply-side policies are typically designed to improve the productive capacity or potential output of an economy. An increase in spending on infrastructure (option C) can improve the productivity of an economy by improving the quality and quantity of factors of production such as transport, communication, and energy. Options A, B, and D (decrease in discount rate, increase in taxes, and decrease in required reserve ratio, respectively) are all demand-side policies aimed at stimulating aggregate demand, and have little or no direct impact on the productive capacity of an economy.

Supply-Side Policy Includes