The supporters of a proposal to increase marginal taxes on those earning over $250,000 a year say this change would generate $100 million in new tax revenues. A supply-side economist would argue that the actual revenue raised will be
A) less than $100 million because some people will respond by working less.
B) exactly $100 million because there are no offsetting factors to a tax increase.
C) more than $100 million, because lower income people will work harder when they perceive the tax system to be fairer.
D) more than $100 million because interest rates will also be affected.
Correct Answer:
Verified
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