Supply-Side Policies Focus on Long-Run Growth

Steps:

• Recall that supply-side policies target the supply of goods and services, not demand.
• Identify their primary goal: boosting productive capacity through incentives like tax cuts or deregulation.
• Evaluate each option against this goal to find the match.
• Confirm B aligns with increasing potential output over time.

Why B is correct:

• Supply-side policies enhance the economy's long-run aggregate supply curve by improving productivity and efficiency, as per the AS-AD model.

Why the others are wrong:

• A: These policies target aggregate supply, not demand, which is the focus of demand-side measures.
• C: They address structural unemployment long-term, not cyclical tied to demand fluctuations.
• D: Effects occur in the long run by altering production factors, not short-term stabilization.

Final answer: B