Supply-side policy enhances productivity for growth

Steps:

• Identify policy: Increased spending on workplace training is a supply-side measure to improve skills and productivity.
• Analyze impact: Training raises labor efficiency, shifting aggregate supply curve rightward.
• Link to macro outcomes: Higher productivity increases potential output and long-run economic growth.
• Evaluate options: Growth rate rises without direct effects on employment, exchange, or interest rates.

Why C is correct:

• Supply-side policies like training boost human capital, increasing productive capacity and the economy's growth rate per the aggregate supply model.

Why the others are wrong:

• A: Training improves employability, likely raising the employment rate.
• B: No direct link; supply-side effects on exchange rate depend on capital flows, not guaranteed decrease.
• D: Growth may indirectly lower interest rates via higher savings, not increase them.

Final answer: C