Which statement is consistent with the supply-side theories?
A) The Bank of Canada should use monetary policy only to control the rate of inflation.
B) The government should promote full employment and production.
C) The government should periodically increase the minimum wage and unemployment insurance benefits.
D) Tax cuts influence the aggregate supply significantly.

Question

Quizplus · Accepted Answer

Supply-side theories emphasize that reducing taxes and promoting investment will lead to increased production and economic growth. Therefore, tax cuts are seen as a significant factor in influencing aggregate supply. Options A, B, and C do not align with the supply-side theories. Option A only focuses on controlling inflation, while supply-side theories emphasize promoting economic growth. Option B, promoting full employment and production, could align somewhat with supply-side theories, but it does not address tax cuts or other policies that promote investment. Option C, increasing the minimum wage and unemployment insurance benefits, could actually decrease the incentives for individuals to work and invest, which goes against the supply-side approach.

Which Statement Is Consistent with the Supply-Side Theories