Which is a basic proposition of supply-side economics?
A) The Federal Reserve should target the Federal funds rate rather than the money supply
B) Tax-hikes on business reduce productivity and output and reduce aggregate supply
C) Low marginal tax rates reduce incentives to work, saving, and investment
D) Transfer payments increase incentives to work

Question

Quizplus · Accepted Answer

Supply-side economics advocates for reduced taxes on businesses as a way to encourage investment and increase aggregate supply, which in turn can boost the economy. This is based on the idea that taxes reduce incentives to invest and produce more goods and services, which ultimately slows down economic growth.

Which Is a Basic Proposition of Supply-Side Economics