Distinguishing supply-side policies from monetary policy

Steps:

• Define supply-side policy: Government measures to boost productive capacity, productivity, or long-term economic supply.
• Assess option A: Infrastructure spending increases physical capital, enhancing supply.
• Assess options B and C: R&D and education subsidies improve innovation and skills, raising supply potential.
• Assess option D: Money supply increase affects demand and inflation, not productive capacity.

Why D is correct:

• Increasing money supply is a monetary policy tool under central bank control, aimed at managing aggregate demand per the quantity theory of money (MV = PY), not supply-side factors.

Why the others are wrong:

• A: Directly expands supply by improving infrastructure efficiency and output capacity.
• B: Boosts supply through technological advancements and productivity gains.
• C: Enhances supply by investing in human capital via better education and training.

Final answer: D