Which of the following best defines supply-side economics as discussed in introductory economics courses?

• A. A theory that suggests controlling the money supply is the most effective way to manage the economy.
• B. An approach that focuses on increasing government spending to stimulate demand and employment.
• C. An economic theory that emphasizes reducing taxes and government regulation to increase production and economic growth.
• D. A policy that advocates for higher tariffs to protect domestic industries from foreign competition.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the context of supply-side economics within introductory economics courses. It is a macroeconomic theory focused on how to stimulate economic growth by influencing the supply side of the economy.
2. Step 2: Recognize that supply-side economics emphasizes policies that increase production capacity, such as reducing taxes and government regulations, which are believed to encourage businesses to produce more goods and services.
3. Step 3: Contrast supply-side economics with other economic approaches mentioned, such as controlling the money supply (monetary policy), increasing government spending (demand-side or Keynesian economics), and protectionist trade policies (tariffs).
4. Step 4: Identify that supply-side economics is distinct because it focuses on incentives for producers rather than demand management or trade protection.
5. Step 5: Conclude that the best definition of supply-side economics is the one that highlights reducing taxes and government regulation to increase production and economic growth.