Which policy focuses on improving education, research and development, tax reform, and reform of trade unions to boost growth?

• A. Fiscal policy
• B. Monetary policy
• C. Productivity policy
• D. Contractionary monetary policy

Answer: (C)

Long-run economic growth hinges on improvements in productivity—how effectively inputs like labor and capital are turned into goods and services. A policy focused on boosting growth by targeting education, research and development, tax reform, and reforms to how trade unions operate aims to lift that productivity.

Education builds human capital, giving workers the skills to use new technologies and perform more efficiently. Research and development drive innovation, creating smarter processes and new products that make production more productive. Tax reform can alter incentives, encouraging investment, entrepreneurship, and work effort, which all support higher output. Reform of trade unions and other labor-market arrangements can reduce rigidities, make hiring and firing more flexible, and help the economy adapt to changing conditions, boosting overall efficiency.

Taken together, these measures shift the long-run growth path by raising potential output, rather than merely influencing demand in the short run. That’s why this policy approach is described as productivity policy.