________ 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:

Perfect Information

A scenario in which all participants have access to all relevant information for decision-making.

Price Changes

Alterations in the selling price of goods or services over time due to various factors like supply and demand, inflation, or production costs.

Consumers

Consumers are individuals or groups that use goods and services generated within the economy to satisfy their personal needs and desires.

Jointly Owned

Pertains to a property or asset that is owned by two or more parties, with rights and responsibilities shared among them.