According to a supply-side economist, what would be the effect of a cut in personal income tax rates?
A) It would decrease government revenues.
B) It would increase government revenues.
C) It would have no effect on government revenues.
D) It would increase unemployment.

Question

According to a supply-side economist, what would be the effect of a cut in personal income tax rates?  
A) It would decrease government revenues. 
B) It would increase government revenues. 
C) It would have no effect on government revenues. 
D) It would increase unemployment.

Quizplus · Accepted Answer

According to supply-side economics, a cut in personal income tax rates would increase incentives for individuals to work and invest. This would result in increased economic growth and ultimately lead to higher government revenues due to an expansion in the tax base. This theory is often referred to as the Laffer Curve, which suggests that at certain tax rates, lowering taxes can actually lead to an increase in government revenue.

According to a Supply-Side Economist, What Would Be the Effect