Policies Boosting Incentives Drive Growth

Steps:

• Identify economic growth as rising GDP from increased production, consumption, or investment.
• Evaluate each policy's impact on incentives for work, saving, or business activity.
• Select the option that enhances disposable income and labor participation.
• Confirm it aligns with supply-side economics principles.

Why C is correct:

• Raising the income tax threshold increases take-home pay, boosting disposable income and labor supply per the Laffer curve, which shows lower effective taxes stimulate economic activity and growth.

Why the others are wrong:

• A: Higher corporation taxes reduce business profits and investment, deterring expansion and slowing growth.
• B: Elevated interest rates increase borrowing costs, curbing consumer spending and business loans, which contracts the economy.
• D: More regulations raise startup barriers and costs, discouraging entrepreneurship and innovation essential for growth.

Final answer: C