A basic criticism of supply-side economics is that
A) empirical research clearly shows that incentives to work and invest vary directly with marginal tax rates.
B) lower taxes will increase aggregate supply much more than they will increase aggregate demand.
C) lower taxes will increase aggregate demand much more than they will increase aggregate supply.
D) higher taxes will reduce incentives to work, invest, and innovate.

Question

Quizplus · Accepted Answer

Supply-side economics posits that reducing tax rates stimulates economic growth by increasing supply. Critics argue that such tax cuts may instead lead to higher aggregate demand rather than significantly boosting aggregate supply, due to increased consumer spending.

A Basic Criticism of Supply-Side Economics Is That