Me: Question 1: supply side economists argue cuts in tax rates A. have no effect
ID: 1209344 • Letter: M
Question
Me: Question 1: supply side economists argue cuts in tax rates
A. have no effect on tax revenues
B. always reduce tax revenues
C. may increase tax revenues
D. always increase budget defecits
Question 2: According to David Ricardo, an increase in government spending without any tax increase will not increase aggregate demand because
A. consumers will increase their consumption proportionately more than keynesian economists believe they will
B. Consumers will consume less and save more to prepare for increases taxes in the future
C. The private sector is more likely than the public sector to spend any extra income on national defense
D. consumers will save less than they otherwise would have
Question 3: The Laffer curve indicates which of the following?
A. there is an ideal tax revenue maximizing tax rate for government taxes
B. there is an ideal tariff rate that will maximize exports and minimize imports
C. there is an ideal amount of government spending that will lead to full national employment
D. there is an ideal interest rate that will maximize investment spending.
Explanation / Answer
Supply side economists believe that a tax cut shifts the aggregate supply curve to the right
An economic theory that suggests that when a government tries to stimulate demand by increasing debt-financed government spending, demand remains unchanged. This is because the public will save its excess money in order to pay for future tax increases that will be initiated to pay off the debt
3.
The laffer curve says that there exists an optimal tax rate that maximizes government revenue