Once supply-side effects are taken into account, income tax cuts can change
i. the supply of labour.
ii. potential GDP.
iii. the growth rate of potential GDP.

Question

Quizplus · Accepted Answer

Supply-side effects of income tax cuts include increasing the supply of labor (as people are incentivized to work more when they can keep more of their earnings) and potentially increasing potential GDP (as the increased labor supply can enhance the economy's capacity to produce goods and services). However, the impact on the growth rate of potential GDP is more complex and not directly implied by the statement.

Once Supply-Side Effects Are Taken into Account, Income Tax Cuts