Britain is cutting its value added tax (which is similar to a sales tax) to 15 percent from 17.5 percent to encourage British consumers to keep spending money. According to the supply side view,

Question

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The supply side view suggests that tax cuts can increase economic growth and stimulate consumer spending. By cutting the value added tax, the cost of goods and services may decrease, which could increase the purchasing power of consumers. This increase in purchasing power is equivalent to an increase in the real wage rate, as consumers can purchase more goods and services with their income. Therefore, Choice C is the correct answer. Choices A, B, and D are incorrect as they do not align with the supply side view.

Britain Is Cutting Its Value Added Tax (Which Is Similar