Tax Cut Boosts Economy via Fiscal Expansion and Supply Incentives Steps: - Identify the action: Government lowers corporate profit tax from 28% to 20%, increasing after-tax profits for businesses. - Classify fiscal impact: Tax cuts leave more money in the economy, encouraging spending and investment, which defines expansionary fiscal policy. - Assess supply-side effects: Reduced taxes lower production costs and boost incentives for work, investment, and output, aligning with supply-side policy goals. - Rule out monetary policy: This involves government taxation, not central bank actions like adjusting interest rates or money supply. Why B is correct: - Expansionary fiscal policy uses tax reductions to stimulate aggregate demand (per Keynesian definition), while supply-side policy enhances productive capacity by cutting business taxes (as in Reaganomics incentives). Why the others are wrong: - A: Contractionary fiscal policy raises taxes to slow the economy, opposite of this tax cut. - C: Monetary policy controls money supply via central banks, unrelated to government tax changes. - D: Monetary policy is not involved, as this is a fiscal tax adjustment, not money supply manipulation. Final answer: …