$$\begin{array} { | c | c | }
\hline \text { Average Tax Rate } & \text { Tax Revenue } ( \$ B ) \
\hline 20 \% & \$ 250 \
\hline 40 & 300 \
\hline 60 & 250 \
\hline 80 & 200 \
\hline
\end{array}$$ Refer to the table. If the current tax rate is 60 percent, supply-side economists would advocate
A) lowering tax rates to 20 percent, or lower if possible.
B) lowering tax rates to 40 percent.
C) keeping tax rates at 60 percent.
D) raising tax rates to 80 percent.

Question

$$\begin{array} { | c | c | } 
\hline \text { Average Tax Rate } & \text { Tax Revenue } ( \$ B ) \
\hline 20 \% & \$ 250 \
\hline 40 & 300 \
\hline 60 & 250 \
\hline 80 & 200 \
\hline
\end{array}$$ Refer to the table. If the current tax rate is 60 percent, supply-side economists would advocate
A) lowering tax rates to 20 percent, or lower if possible.
B) lowering tax rates to 40 percent.
C) keeping tax rates at 60 percent.
D) raising tax rates to 80 percent.

Quizplus · Accepted Answer

According to supply-side economics, lowering tax rates can stimulate economic growth and result in increased tax revenue. In this case, tax revenue decreases as the average tax rate increases from 20% to 60%, indicating that the tax rate is too high. Therefore, supply-side economists would advocate for a reduction in tax rates, but not as low as 20%. Since tax revenue is highest at a 40% tax rate, the best choice would be to lower tax rates to 40%.

Refer to the Table