A senator states: "We need to cut taxes in order to increase incentives to work and produce, so that we can pull the nation out of this economic slump." A mainstream economist who is a critic of this policy would likely reply that:
A) Rather than cutting taxes there should be a decrease in government spending to address the problem
B) Rather than cutting taxes, monetary policy should become tighter to control the inflation rate
C) Increasing government spending is a surer way to increase production and pull the nation out of this economic slump
D) Cutting taxes will only reduce output further, and aggravate the situation

Question

Quizplus · Accepted Answer

A mainstream economist might argue that increasing government spending can directly boost demand and production, which is a more reliable way to stimulate the economy during a slump compared to tax cuts, which may not immediately translate into increased spending or production.

A Senator States: "We Need to Cut Taxes in Order