Statement I: the Key Difference Between Supply-Siders and Other Economists

question 127

Multiple Choice

Statement I: The key difference between supply-siders and other economists is in their judgment about how much output would be changed by a change in the tax rates or regulations facing taxpayers.
Statement II: A supply-side economist would argue that a big tax cut would cause an output increase,but not inflation,when the economy is already near full employment.

• A)Statement I is true and statement II is false.
• B)Statement II is true and statement I is false.
• C)Both statements are true.
• D)Both statements are false.

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Definitions:

Long Run Equilibrium

An economic condition where all factors of production and costs are variable and the market is fully adjusted to any changes.

Short Run Equilibrium

A situation in economics where demand and supply are balanced at current prices within a short timeframe.

Contractionary Gap

A situation where the real GDP is lower than the potential GDP at full employment, indicating underutilized economic resources.

Expansionary Gap

An economic situation where the actual output exceeds the potential output, often leading to inflation.