Supply-side policies promote growth and stability via productivity

Steps:

• Identify goals: Economic growth increases output; price stability avoids inflation.
• Evaluate policies: Fiscal and monetary affect demand, risking inflation; import barriers distort trade; supply-side targets production.
• Compare impacts: Demand policies boost short-term growth but can overheat economy; supply-side enhances long-term capacity without excess demand.
• Select best: Supply-side aligns both goals by shifting aggregate supply curve rightward.

Why D is correct:

• Supply-side policy increases productive capacity (e.g., via tax cuts or deregulation), shifting AS curve right to raise output and lower prices per the AD-AS model.

Why the others are wrong:

• A: Fiscal policy (e.g., spending) stimulates demand, risking inflation if near full employment.
• B: Import barriers raise costs, reducing efficiency and potentially causing stagflation.
• C: Monetary policy (e.g., low rates) boosts demand for growth but can fuel inflation.

Final answer: D