Which of the following statements about the tax cut enacted in 1981 during the Reagan administration is correct?
A)The tax cut caused the recession of 1982.
B)The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that time.
C)The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982.
D)The tax cut was opposed by the "supply side" economists in President Reagan's administration.
E)The tax cut was favored by Congress but opposed by the President and passed over his veto.

Question

Quizplus · Accepted Answer

The tax cut enacted in 1981 during the Reagan administration, combined with the recession of 1982, led to one of the largest peace-time deficits ever experienced up to that time. This is due to the fact that the tax cut reduced government revenue, while the recession increased government spending on social welfare programs such as unemployment insurance. The combination of these two factors led to a budget deficit.

Which of the Following Statements About the Tax Cut Enacted