Which of the Following Propositions Would a Proponent of Supply-Side

question 107

Multiple Choice

Which of the following propositions would a proponent of supply-side economics be most likely to stress?

• A)​Higher marginal tax rates will lead to a reduction in the budget deficit and lower interest rates, because they expand government revenues.
• B)​Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output, because 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, since they do not consume resources directly.
• D)​A tax reduction will increase the disposable income of households.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.

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