Which of the Following Statements Is True

question 38

Multiple Choice

Which of the following statements is true ?

• A) Above the optimal tax rate, a reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues.
• B) According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation.
• C) The presence of the automatic stabilizers tends to destabilize the economy.
• D) To combat inflation, Keynesians recommend lower taxes and greater government spending.

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Definitions:

Payoffs

The outcomes or returns from an action or investment, notably used in the context of game theory to represent the consequences faced by participants.

Short Run

In economics, a period during which at least one of a firm's inputs is fixed, limiting its capacity to adjust to changes in demand.

Long Run

A period in which all factors of production and costs are variable, allowing for full adjustment to change.

Marginal Revenue

The additional income gained from selling one more unit of a product or service.