________ Is a Proposition That a Strong Proponent of Supply

question 46

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 above is a likely statement for a supply-side proponent.

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Definitions:

Commitment

The state or quality of being dedicated to a cause, activity, or goal.

Coalition Building

The process of assembling a temporary alliance or partnership of groups in order to achieve a common goal.

Personal Appeals

Persuasion techniques that are based on appeals to emotion, personal relationships, or loyalty rather than logic or reason.

Exchange

The act of giving one thing and receiving another, especially of a similar value, in return or trade.