According to supply-side economics, what should governments focus on to stimulate the economy?

The correct choice emphasizes that supply-side economics advocates for policies aimed at increasing production and economic growth by reducing barriers for businesses and individuals. By focusing on reducing regulations and taxes, governments can incentivize investment, encourage entrepreneurship, and promote job creation.

Lower taxes mean that individuals and businesses retain more of their income, motivating them to spend and invest, which can lead to increased economic activity. Similarly, reducing regulations can lessen the burden on businesses, allowing them to operate more freely and efficiently. This approach aims to boost overall productivity in the economy, leading to sustainable growth over time.

In contrast, the other options propose strategies that do not align with the principles of supply-side economics. Increasing consumer taxes would reduce disposable income, potentially dampening spending and investment. Enhancing social welfare programs tends to focus more on redistribution rather than stimulating production. Maintaining high interest rates would likely make borrowing more expensive, which can discourage investment and consumption, further stifling economic growth.