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If Tax Rates Are Cut,one Might Expect to Observe an Increase

Question 106

Multiple Choice

If tax rates are cut,one might expect to observe an increase in the budget deficit.Supply-siders question this observation,arguing that


A) this is a price that must be paid for a more equitable tax system.
B) when taxes are cut,expenditures must also be cut.
C) a decrease in the tax rate may actually generate an increase in tax revenues.
D) tax wedges will make up the difference.
E) taxes should not be cut;transfer payments should be increased.

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