Which of the following statements is true ?
A) Above the optimal tax rate, a reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues.
B) According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation.
C) The presence of the automatic stabilizers tends to destabilize the economy.
D) To combat inflation, Keynesians recommend lower taxes and greater government spending.

Question

Quizplus · Accepted Answer

The Laffer curve illustrates that there is an optimal tax rate that maximizes revenue. Above this rate, decreasing tax rates can actually increase total tax revenue by incentivizing economic activity.

Which of the Following Statements Is True