From the perspective of supply-side economists, a cut in tax rates will
A) increase output but will increase the budget deﬁcit.
B) increase unemployment but will reduce the budget deﬁcit.
C) reduce unemployment but will increase the budget deﬁcit.
D) reduce unemployment and also reduce the budget deﬁcit.

Question

Quizplus · Accepted Answer

Supply-side economists believe that a reduction in tax rates on individuals and businesses will lead to increased incentives for work, investment, and entrepreneurship, which will ultimately lead to increased economic growth and government revenue. Therefore, a tax cut can both reduce unemployment and reduce the budget deficit.

From the Perspective of Supply-Side Economists, a Cut in Tax