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A basic criticism of supply-side economics is that:
 
A) Lower taxes will increase aggregate supply much more than they will increase aggregate demand.
B) Empirical research clearly shows that incentives to work and invest vary directly with marginal tax rates.
C) Higher taxes will reduce incentives to work, invest, and innovate.
D) Lower taxes will increase aggregate demand much more than they will increase aggregate supply.

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Joshua Stredder
Joshua StredderLv10
20 Oct 2020

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Related questions

Which of the following is a tenet of supply-side economics?
 
a. Higher marginal tax rates severely discourage work, saving, and investment.
b. Increases in social security taxes and other business taxes shift the aggregate supply curve to the right.
c. The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate.
d. Transfer payments increase incentives to work.
Which of the following is a tenet of supply-side economics?
a. High marginal tax rates severely discourage work, saving, and investment.
b. Increases in social security taxes and other business taxes shift the aggregate supply curve to the right.
c. The Federal Reserve should adhere to a monetary rule that limits increases in the money supply to a 5 percent annual rate.
d. Transfer payments increase incentives to work.

1) Modern mainstream macroeconomists agree with the monetarists that:

a) the Fed should increase the money supply at a fixed annual rate.

b) velocity is highly stable.

c) fiscal policy is largely ineffective.

d) "money matters" in the macroeconomy.

2) The velocity of money is the:

a) relationship between the money supply and the price level.

b) number of times per year the average dollar is spent on final goods and services.

c) relationship between asset and transactions demands for money.

d) price level divided by aggregate supply.

3) When most consumers and firms reduce spending only because they expect other consumers and firms to reduce spending, and a recession results:

a self-correction has occurred.

an adverse aggregate supply shock has occurred.

a coordination failure has occurred.

a real-business-downturn has occurred.

4) (Last Word) Suppose that real GDP falls to 2 percent below potential GDP. Then, according to the Taylor rule, the Fed should reduce the Federal funds, relative to the current rate of inflation, by:

1/2 percentage point.

1 percentage point.

2 percentage points.

4 percentage points.

5) Critics of supply-side economics:

argue that a tax cut will increase aggregate supply by more than it increases aggregate demand.

contend that the relationship between tax rates and economic incentives is small and of uncertain direction.

believe that a decline in tax rates will increase tax revenues.

point out that tax cuts enable households to substitute work for leisure.

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