The Implicit Assumption Behind the Economic Recovery Tax Act of 1981

question 66

Multiple Choice

The implicit assumption behind the Economic Recovery Tax Act of 1981, which cut the individual income tax rate by 25% over three years, was that

• A) the economy was on the negatively sloped portion of the Laffer curve.
• B) the economy was on the positively sloped portion of the Laffer curve.
• C) tax rate reductions will stimulate demand in the economy and move the economy to full employment.
• D) tax rate reductions will decrease supply in the economy and therefore choke off the high rate of inflation that the economy was experiencing.

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Definitions:

End-Of-Quarter Payments

Payments that are made at the conclusion of a fiscal quarter, often related to financial obligations such as loans or leases.

Annuity

A fiscal product designed to disburse a static sequence of payments to someone, chiefly utilized as a means for generating income during retirement.

Periodic Interest Rate

The interest rate charged or earned over a specific period of time, often used in the context of loans or investments.

Annuity

An investment plan that entails fixed payments to beneficiaries, mainly to serve as an income source for those who have retired.