According to supply-side economics, tax cuts:

Question

Quizplus · Accepted Answer

According to supply-side economics, tax cuts increase incentives to work and save and cause increases in potential output. This is because the increased income after tax cuts provide individuals and businesses with more resources to invest and spend, which ultimately increases the supply of goods and services in the economy. While some critics argue that tax cuts may cause budget deficits and sacrifice equity, proponents of supply-side economics argue that the resulting economic growth will eventually increase tax revenue and benefit all members of society. Option D is incorrect because supply-side economics focuses on increasing potential output through supply-side policies, rather than directly increasing demand.

According to Supply-Side Economics, Tax Cuts