What characterizes supply-side economics?

Supply-side economics emphasizes the idea that economic growth can be most effectively fostered by lowering taxes and decreasing regulation. This approach is based on the belief that reducing the tax burden on individuals and businesses will boost their incentive to invest in the economy. When individuals and companies retain more of their earnings, they are more likely to invest in new projects, expand their operations, and create jobs.

Additionally, reducing regulations is thought to enhance business efficiency and promote entrepreneurial activities. By minimizing governmental restrictions, businesses can operate more freely, potentially leading to increased productivity and innovation. Overall, the core of supply-side economics is that greater investment from the private sector will lead to economic expansion and increased overall prosperity.

In contrast, the other options focus on different economic strategies. Lowering taxes and increasing government spending suggests a demand-side approach that is aimed at stimulating consumer demand. Focusing solely on consumer demand overlooks the supply-side factors that can drive growth. Similarly, increasing regulations typically adds more burdens to businesses rather than easing their ability to invest, which runs counter to the principles of supply-side economics. Thus, the correct choice appropriately captures the fundamental tenets of supply-side economic theory.