Which policy tends to influence the aggregate supply of the economy?

Microeconomic policies are instrumental in influencing the aggregate supply of the economy because they target specific sectors or industries, enhancing efficiency, productivity, and overall economic output. These policies can include government regulations, competition laws, and incentives to promote innovation and investment in infrastructure. By improving the functioning of markets and ensuring that resources are used efficiently, microeconomic policies can directly impact the capacity of the economy to produce goods and services.

While monetary policies primarily affect aggregate demand through interest rates and money supply, and exchange rate policies can impact the trade balance and thus aggregate demand, they do not directly influence the capacity and productivity of the economy like microeconomic policies do. Trade policies can also have significant effects, particularly in terms of import/export dynamics, but these are secondary to the direct productivity influences that microeconomic policies hold.