Refer to the above diagram.If tax rates are between b and d, then supply-side economists are of the opinion that a(n):
A)increase in tax revenues will increase tax rates.
B)decrease in tax rates will increase tax revenues.
C)increase in tax rates will increase tax revenues.
D)decrease in tax revenues will decrease tax rates.

Question

Refer to the above diagram.If tax rates are between b and d, then supply-side economists are of the opinion that a(n):
A)increase in tax revenues will increase tax rates. 
B)decrease in tax rates will increase tax revenues. 
C)increase in tax rates will increase tax revenues. 
D)decrease in tax revenues will decrease tax rates.

Quizplus · Accepted Answer

According to supply-side economists, a decrease in tax rates will increase the incentives for people to work and invest, which will lead to increased economic activity and eventually higher tax revenues. Conversely, an increase in tax rates will discourage people from working and investing, potentially leading to lower economic activity and decreased tax revenues. Therefore, supply-side economists advocate for lower tax rates as a means of stimulating economic growth and increasing tax revenues.

Refer to the Above Diagram