Some economists believe that permanently lower marginal income tax rates __________ the incentive to work and thus shift the __________.
A) increase; LRAS curve to the right
B) increase; AD curve to the right
C) increase; SRAS curve to the left
D) decrease; LRAS curve to the right
E) decrease; AD curve to the left

Question

Quizplus · Accepted Answer

Permanently lower marginal income tax rates increase the incentive to work because individuals get to keep more of their income, which can lead to an increase in labor supply and potentially productivity over time. This can shift the Long-Run Aggregate Supply (LRAS) curve to the right, indicating an increase in the economy's potential output.

Some Economists Believe That Permanently Lower Marginal Income Tax Rates