Which statement(s) is/are TRUE? I. Changes in tax rates impact only aggregate demand.
II) According to the Laffer curve, if the tax rate is above 50%, lowering the tax rate will always raise tax revenue.
III) A repeal of existing investment tax credits will cause aggregate supply to shift to the left.

Question

Quizplus · Accepted Answer

I is false, as changes in tax rates can also impact aggregate supply by affecting the incentives for work and investment. 
II is false, as the Laffer curve only suggests that there is a point where lowering tax rates can increase tax revenue, but it does not mean that this always happens at a tax rate above 50%. 
III is true, as a repeal of investment tax credits would reduce the incentives for businesses to invest, leading to a leftward shift in aggregate supply.

Which Statement(s) Is/are TRUE? I