Supply-side economists believe that a reduction in the tax rate
A)always decrease government tax revenue.
B)shifts the aggregate supply curve to the right.
C)provides no incentive for people to work more.
D)would decrease consumption.

Question

Quizplus · Accepted Answer

Supply-side economists believe that a reduction in the tax rate will encourage businesses and individuals to produce and invest more, which will lead to an increase in aggregate supply. This is because lower tax rates provide more after-tax income, which can be used for consumption or investment. As a result, it is believed that a reduction in tax rates will boost economic growth, create more jobs, and ultimately increase government revenues through increased economic activity.

Supply-Side Economists Believe That a Reduction in the Tax Rate