In the Keynesian view,a reduction in the marginal income tax rate would cause
A)output to rise and the price level to fall.
B)both output and the price level to rise.
C)output to rise with the price level unchanged.
D)the price level to rise with output unchanged.

Question

Quizplus · Accepted Answer

In the Keynesian view, a reduction in the marginal income tax rate increases disposable income, leading to higher consumption and demand. This, in turn, stimulates economic activity (output) and can lead to higher prices (price level) due to increased demand.

In the Keynesian View,a Reduction in the Marginal Income Tax