Question:
Which of the following considered a supply-side policy?
(1) A reduction in the government budget deficit
(2) Granting investment tax credits for businesses to encourage investment
(3) The imposition of tariff on imported goods
(4) Transfer of privately owned businesses to the government sector
(5) An increase in government spending that would lead to increased aggregate demand
Correct Answer:
(2)
Answer Explanation:
Supply-side policies aim to increase the productive capacity (LRAS) of an economy. Investment tax credits incentivize businesses to upgrade capital and technology, thereby boosting long-term productivity and potential output.
Topic: Macroeconomic Policy Year: 2021
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