The Reagan administration's 1981 personal income tax changes were designed to:
A)stimulate aggregate demand and reduce unemployment.
B)stimulate aggregate demand and increase economic growth.
C)stimulate aggregate supply and increase economic growth.
D)decrease aggregate demand in order to reduce inflation.
E)increase tax revenues to reduce the federal budget deficit.

Question

Quizplus · Accepted Answer

The Reagan administration's 1981 personal income tax changes, often known as the Economic Recovery Tax Act (ERTA), were designed primarily to stimulate aggregate supply by reducing marginal tax rates on individuals and businesses. The goal was to incentivize work and investment, ultimately leading to increased economic growth. However, it was also hoped that increased economic activity would generate additional tax revenue, which could help reduce the federal budget deficit. While it is possible that the tax changes could have also stimulated aggregate demand to some extent, this was not the primary objective.

The Reagan Administration's 1981 Personal Income Tax Changes Were Designed