Which of the following statements is true?
A) A reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues.
B) According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation.
C) The presence of the automatic stabilisers tends to destabilise the economy.
D) To combat inflation, Keynesians recommend lower taxes and greater government
Spending.

Question

Quizplus · Accepted Answer

A reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues because it suggests that current tax rates are beyond the optimal point, where lower rates could incentivize more economic activity and thus increase total tax revenue.

Which of the Following Statements Is True