________ Is a Proposition That a Strong Proponent of Supply-Side

question 29

Multiple Choice

________ is a proposition that a strong proponent of supply-side economics would most likely stress.

• A) Higher marginal tax rates will lead to a reduction in the size of the budget deficit and lower interest rates as they depend on government revenues
• B) Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output as they encourage investors to undertake low productivity projects with substantial tax shelter benefits
• C) Income redistribution payments will exert little impact on real aggregate supply as they do not consume resources directly
• D) A tax reduction will increase the disposable income of households, and thus, the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus
• E) None of the options is a likely statement for a supply-side proponent.

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Definitions:

Sales

The total revenue generated from goods or services sold by a company during a specified period.

Invested Assets

Invested assets refer to the resources put into financial instruments or assets with the expectation of earning a return, including stocks, bonds, real estate, and other investment vehicles.

DuPont Formula

A method for analyzing a company's return on equity (ROE), breaking it down into three components: operating efficiency, asset use efficiency, and financial leverage.

Profit Margin

The percentage of revenue that remains after all expenses have been deducted from sales, indicating the financial health and profitability of a business.