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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Definitions:

Hypothalamus

A region of the brain below the thalamus that coordinates both the autonomic nervous system and the activity of the pituitary, controlling body temperature, thirst, hunger, and other homeostatic systems.

Star-Shaped Cells

Often refers to astrocytes, a type of glial cell in the brain and spinal cord, characterized by their star-like shape.

Nervous System

The complex network of nerve cells and fibers that transmits signals between different parts of the body, coordinating actions and sensory information.

Blood Vessels

The tubes in the body through which blood flows, including arteries, veins, and capillaries.