Once supply side effects are taken into account, tax cuts for labor income can change i. the supply of labor
Ii) potential GDP.
Iii) the growth rate of potential GDP.

Question

Quizplus · Accepted Answer

Tax cuts for labor income can incentivize people to work more, increasing the supply of labor. As a result, potential GDP can increase due to more resources being available for production. Additionally, the growth rate of potential GDP can also be affected as a result of this increased supply of labor. Therefore, both i and ii are impacted by tax cuts for labor income.

Once Supply Side Effects Are Taken into Account, Tax Cuts