If the economy is below its full-employment level of real national income,a supply-side economist would argue the appropriate policy is

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A supply-side economist would argue that the appropriate policy is to lower marginal tax rates, which would increase incentives to work, save, and invest, leading to higher economic growth and ultimately increasing real national income. This approach is based on the belief that lower taxes lead to increased investment and production, which in turn leads to higher economic growth, job creation, and ultimately increased government revenue. Expansionary fiscal policy of increasing government spending may not address the structural issues in the economy and may lead to inflationary pressures. Lowering marginal tax rates on people and raising them on corporations may discourage investment and hinder economic growth. Leaving the economy alone may not address the underutilization of resources and may lead to long-term economic stagnation.

If the Economy Is Below Its Full-Employment Level of Real