Supply-side policies boost productive capacity

Steps:

• Define supply-side policy: government interventions to increase aggregate supply by enhancing efficiency, skills, or resources.
• Evaluate options: identify which directly improves production factors like labor or infrastructure.
• Match A to supply-side: affordable homes reduce moving costs, improving labor mobility and workforce participation.
• Eliminate others: B, C, D focus on managing demand rather than expanding supply.

Why A is correct:

• Supply-side policies, per economic theory, target structural improvements like labor mobility to raise potential output and long-run growth.

Why the others are wrong:

• B: Demand-side fiscal/monetary tool to curb aggregate demand and inflation.
• C: Expansionary monetary policy stimulating consumer borrowing and demand.
• D: Demand-side welfare measure increasing disposable income and spending.

Final answer: A