Which is a basic proposition of supply-side economics?
A) The Federal Reserve should target the federal funds rate rather than the money supply.
B) Tax-hikes on business reduce productivity and output and reduce aggregate supply.
C) Low marginal tax rates reduce incentives to work, saving, and investment.
D) Transfer payments increase incentives to work.

Question

Quizplus · Accepted Answer

The basic proposition of supply-side economics is that tax-hikes on business reduce productivity and output, and reduce aggregate supply. This theory suggests that reducing tax rates on businesses and high-income individuals will increase savings, investment, and entrepreneurial activity, leading to economic growth.

Which Is a Basic Proposition of Supply-Side Economics