Supply-side policies boost production and efficiency

Steps:

• Define supply-side policies as measures increasing long-term productive capacity, like deregulation or incentives for work/investment.
• Review options: Identify which directly enhances supply factors (labor, capital, technology).
• Eliminate demand-side or monetary tools unrelated to production.
• Confirm A targets labor market flexibility to raise output potential.

Why A is correct:

• Reducing trade union power deregulates labor markets, increasing flexibility and incentives to work, directly expanding aggregate supply per economic theory.

Why the others are wrong:

• B: Reduces fiscal deficit via spending cuts/tax hikes, mainly stabilizing demand rather than boosting supply.
• C: Open market sale tightens money supply, a monetary policy affecting interest rates and demand.
• D: Tariff protects domestic firms but distorts trade, acting as a demand-management trade barrier.

Final answer: A