All other things held constant,lower marginal (income)tax rates
A) necessarily increase tax revenues.
B) necessarily decrease tax revenues.
C) decrease the attractiveness of productive activities relative to leisure and tax- avoidance activities,and shift the SRAS curve rightward.
D) do not affect the attractiveness of productive activities relative to leisure and tax- avoidance activities and therefore the SRAS does not shift rightward or leftward.
E) increase the attractiveness of productive activities relative to leisure and tax- avoidance activities and shift the SRAS curve rightward.

Question

Quizplus · Accepted Answer

Lower marginal income tax rates increase the incentive for individuals to work harder and produce more, as they get to keep a greater share of their income. This can lead to increased productivity and output, shifting the short-run aggregate supply (SRAS) curve rightward. Additionally, lower marginal tax rates can lead to increased investment, as individuals and firms have more funds to invest, further contributing to an increase in aggregate supply. Therefore, lower marginal income tax rates increase the attractiveness of productive activities relative to leisure and tax-avoidance activities, and shift the SRAS curve rightward, as stated in choice E.

All Other Things Held Constant,lower Marginal (Income)tax Rates