Which action will tend to decrease aggregate supply according to supply-side economists?
A) A decrease in government spending
B) An increase in the stock of capital
C) A decrease in the money supply
D) An increase in marginal tax rates

Question

Quizplus · Accepted Answer

According to supply-side economists, an increase in marginal tax rates reduces the incentives for work, saving, and investment, thereby reducing aggregate supply. This is because high marginal tax rates decrease the after-tax income and reduce the rewards of engaging in productive activities.

Which Action Will Tend to Decrease Aggregate Supply According to Supply-Side