Refer to the graph above. If tax rates are between b and d, then supply-side economists are of the opinion that a(n):
A) Increase in tax revenues will increase tax rates
B) Decrease in tax rates will increase tax revenues
C) Increase in tax rates will increase tax revenues
D) Decrease in tax revenues will decrease tax rates

Question

Refer to the graph above. If tax rates are between b and d, then supply-side economists are of the opinion that a(n):
A) Increase in tax revenues will increase tax rates 
B) Decrease in tax rates will increase tax revenues 
C) Increase in tax rates will increase tax revenues 
D) Decrease in tax revenues will decrease tax rates

Quizplus · Accepted Answer

According to supply-side economists, if tax rates are between b and d, then decreasing tax rates will lead to an increase in tax revenues. This is because lower tax rates incentivize individuals and businesses to work harder and invest more, which can lead to higher economic growth and higher tax revenues in the long run.

Refer to the Graph Above