The idea that creating incentives for individuals and firms to increase productivity leading to an increase in long-run aggregate supply is
A) supply-side economics.
B) demand-side economics.
C) the Ricardian equivalence theorem.
D) laissez-faire economics.

Question

Quizplus · Accepted Answer

Supply-side economics is the idea that policies aimed at incentivizing individuals and firms to increase productivity will lead to an increase in long-run aggregate supply, which in turn can lead to economic growth. This approach focuses on creating favorable conditions for businesses to invest in capital and expand production, ultimately aiming to increase the economy's potential output over time. By contrast, demand-side economics focuses on stimulating demand through policies such as government spending or tax cuts, with the hope that increased consumer spending will lead to higher aggregate demand and economic growth. The Ricardian equivalence theorem is a theory that suggests that changes in government spending have no effect on aggregate demand, as individuals will save more in anticipation of future taxes to pay for the spending. Laissez-faire economics advocates for minimal government intervention in the economy, with the belief that markets will self-regulate and achieve efficient outcomes without interference.

The Idea That Creating Incentives for Individuals and Firms to Increase