A reduction in tax rates may result in a short-term reduction in government revenues, but it will also leave people with more disposable income.

Question

Quizplus · Accepted Answer

When tax rates are reduced, people have more disposable income which they tend to spend or invest, thus boosting the economy. This can lead to a long-term increase in government revenues due to higher economic growth and increased tax revenues from higher incomes. However, in the short-term, there may be a reduction in government revenues as the tax rates are lowered.

A Reduction in Tax Rates May Result in a Short-Term