According to supply-siders the main consequence of reducing tax rates is
A) increases aggregate demand and the price level.
B) increases in aggregate supply.
C) increases in aggregate supply and the price level.
D) making the aggregate supply curve upward-sloping.

Question

Quizplus · Accepted Answer

According to supply-side economics, reducing tax rates can increase the incentives for individuals to work, produce and invest, leading to an increase in aggregate supply. This is because lower tax rates can increase the return on investment and work, and reduce the costs of production and hiring for businesses. As a result, a reduction in tax rates is expected to shift the aggregate supply curve to the right, ideally leading to both higher real output and lower inflation.

According to Supply-Siders the Main Consequence of Reducing Tax Rates