Lower taxes create a multiplier effect in the economy. It leads to:

Question

Quizplus · Accepted Answer

Lower taxes leave more money in the hands of consumers and businesses, leading to an increase in their spending power. This increase in spending leads to an increase in aggregate demand, which can help to boost economic growth. This is known as the multiplier effect, as the initial impact of lower taxes is multiplied through the economy as a result of the increased spending. Neither A, B, nor D are accurate descriptions of the impact of lower taxes on the economy.

Lower Taxes Create a Multiplier Effect in the Economy