Supply-side economist Arthur Laffer has argued that
A) there is no empirically proven relationship between tax rates and incentives.
B) large reductions in personal and corporate income taxes will increase aggregate supply much more than aggregate demand.
C) the only way to eliminate inﬂation is to increase taxes to induce a recession severe enough to eliminate inﬂationary expectations.
D) large cuts in income taxes will increase aggregate demand more than aggregate supply.

Question

Quizplus · Accepted Answer

Arthur Laffer is a supply-side economist who argues for widespread tax cuts, as he believes they will increase aggregate supply substantially more than aggregate demand. This is due to his argument that lower taxes on individuals and businesses will increase the incentives for them to work harder and invest more, leading to a surplus of goods and services in the market. Laffer does not argue that increasing taxes is necessary to combat inflation, as stated in option C. Finally, option A does not accurately reflect his beliefs, as Laffer argues that lower taxes create greater incentives for economic activity.

Supply-Side Economist Arthur Laffer Has Argued That