Boosting productivity to lower production costs

Steps:

• Identify cost-push inflation as rising costs shifting aggregate supply leftward, increasing prices.
• Recognize supply-side policies aim to shift aggregate supply rightward by improving efficiency.
• Evaluate options for long-run impact on productivity and costs.
• Select policy that enhances capital-intensive technology for sustained cost reductions.

Why D is correct:

• Automation via robots raises labor productivity, reducing unit production costs per the productivity-cost relationship in supply-side economics, countering cost-push pressures long-term.

Why the others are wrong:

• A: Rigid work practices hinder efficiency, sustaining high costs and inflation.
• B: Extra hours boost short-run output but not productivity, ignoring long-run cost dynamics.
• C: Unskilled workers increase supply temporarily but add low productivity, failing to address root cost issues.

Final answer: D