Supply-side tax cuts also tend to reduce aggregate demand and promote recession.

Question

Quizplus · Accepted Answer

Supply-side tax cuts are intended to stimulate economic growth by increasing incentives for production and investment. While there may be some short-term reduction in government revenue, the idea is that this will be offset by increased economic activity and ultimately lead to higher tax revenues in the long run. Therefore, their expected effect is to increase aggregate demand rather than reduce it, and they are not typically associated with promoting recession.

Supply-Side Tax Cuts Also Tend to Reduce Aggregate Demand and Promote