Subsidies stimulate domestic production and economic expansion

Steps:

• Subsidies reduce production costs for manufacturers, encouraging higher output.
• Increased domestic production raises overall economic activity and GDP.
• This boost in activity leads to greater employment and investment.
• Resulting expansion drives economic growth.

Why A is correct:

• Subsidies shift the supply curve rightward, increasing aggregate supply and potential output, which directly contributes to higher GDP per economic growth definitions.

Why the others are wrong:

• B: Cheaper domestic goods displace imports, likely reducing them.
• C: Lower costs from subsidies tend to decrease prices, curbing inflation.
• D: Expanded production creates jobs, lowering unemployment.

Final answer: A