If the demand-side effects of supply-side tax cuts are greater than the supply-side effects, then we can expect the result to be a(n)
A)decrease in output and prices.
B)decrease in output and an increase in prices.
C)increase in output and prices.
D)increase in output and a decrease in prices.

Question

Quizplus · Accepted Answer

If the demand-side effects of supply-side tax cuts are greater than the supply-side effects, it means that the increase in demand (due to higher disposable income and increased spending) outpaces the increase in supply. This scenario typically leads to an increase in both output (to meet the higher demand) and prices (due to the higher demand relative to supply).

If the Demand-Side Effects of Supply-Side Tax Cuts Are Greater