An income tax cut that provides a greater incentive to work than an alternative tax cut will result in comparatively

Question

Quizplus · Accepted Answer

An income tax cut that provides a greater incentive to work will lead to an increase in labor supply, which will increase production and lead to higher real GDP in the long run. Additionally, the increased demand for goods and services produced by this additional labor will result in a lower price level. Thus, the combination of higher real GDP and a lower price level is the most likely outcome.

An Income Tax Cut That Provides a Greater Incentive to Work