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-focused policies (e.g., fiscal/monetary adjustments affecting spending).
• Select the option targeting supply-side constraints, such as labor market flexibility.

Why A is correct:

• Reducing trade union power deregulates labor markets, lowering wage rigidity and increasing employment/productivity, per supply-side economics principles.

Why the others are wrong:

• B: Reduces fiscal deficit via spending cuts/tax hikes, primarily stabilizing demand rather than boosting supply.
• C: Open market sale tightens money supply, a monetary policy to control inflation/demand, not production capacity.
• D: Tariff protects domestic industries but raises import costs, distorting trade without directly enhancing supply efficiency.

Final answer: A