Lowering marginal tax rates and increasing government transfer payments are policies commonly used to increase aggregate supply.

Question

Quizplus · Accepted Answer

Lowering marginal tax rates can provide an incentive to increase work effort and investment, which can increase aggregate supply. However, increasing government transfer payments may reduce work effort and discourage investment, which can decrease aggregate supply. Therefore, increasing transfer payments is not a commonly used policy to increase aggregate supply.

Lowering Marginal Tax Rates and Increasing Government Transfer Payments Are