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, decreasing tax rates between b and d will increase tax revenues. This is because lower tax rates will lead to increased economic activity and investment, stimulating economic growth and resulting in higher tax revenues in the long run.

Refer to the Above Diagram