________ is a proposition that a strong proponent of supply-side economics would most likely stress.
A) Higher marginal tax rates will lead to a reduction in the size of the budget deficit and lower interest rates as they depend on government revenues
B) Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output as they encourage investors to undertake low productivity projects with substantial tax shelter benefits
C) Income redistribution payments will exert little impact on real aggregate supply as they do not consume resources directly
D) A tax reduction will increase the disposable income of households, and thus, the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus
E) None of the options is a likely statement for a supply-side proponent.

Question

Quizplus · Accepted Answer

Supply-side economics emphasizes that lower marginal tax rates boost economic activity and efficiency by encouraging investment and innovation, which in turn increases aggregate output. Option B reflects this view by suggesting that higher marginal tax rates discourage productive investment due to the attractiveness of less efficient, tax-advantaged projects.

________ Is a Proposition That a Strong Proponent of Supply-Side