Which economic policy is best illustrated by the principle of comparative advantage?

The principle of comparative advantage highlights that countries should specialize in producing goods and services for which they have the lowest opportunity cost compared to others. This concept is foundational to the argument for international trade, as it suggests that by focusing on what they produce best, countries can trade to obtain other goods at a lower cost than if they attempted to produce everything domestically.

Reducing tariffs is a clear application of this principle, as it lowers barriers to trade and allows countries to export their specialized goods while importing others more efficiently produced abroad. This leads to a more efficient allocation of global resources, increased wealth for participating nations, and an overall improvement in economic welfare.

The other options, while representing important economic policies, do not directly illustrate the idea of comparative advantage. Raising government spending focuses more on domestic economic conditions, maintaining a stable money supply pertains to monetary policy aimed at inflation control, and adjusting tax policy relates to fiscal policy and funding government operations, none of which directly align with the comparative advantages of countries engaging in international trade.