Under the supply-side view, an increase in marginal tax rates results in an increase in real GDP.True or False. Under the supply-side view, changes in marginal tax rates are a short-run stabilization tool used to reduce fluctuations in aggregatedemand.O TrueFalse While Keynesian analysis focuses on the impact of tax policy on aggregate demand as a tool for short run stabilization, supply-side economists stressthat changes in marginal tax rates also have important long-run effects on the incentives to work, invest, and use resources efficiently.Using the graph below illustrate how an increase in marginal tax rates would impact an economy under the supply-side view.SRASXADPRICE LEVELREAL CORAD11SHASLRA

Marginal tax refers to the tax rate applied to the last dollar of income earned by individual.This…

Under the supply-side view, an increase in marginal tax rates results in an increase in real GDP. True or False. Under the supply-side view, changes in marginal tax rates are a short-run stabilization tool used to reduce fluctuations in aggregate demand, O True False

Under the supply-side view, an increase in marginal tax rates results in an increase in real GDP. True or False. Under the supply-side view, changes in marginal tax rates are a short-run stabilization tool used to reduce fluctuations in aggregate demand, O True False

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 10P

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Question

Under the supply-side view, an increase in marginal tax rates results in an increase in real GDP.
True or False. Under the supply-side view, changes in marginal tax rates are a short-run stabilization tool used to reduce fluctuations in aggregate
demand.
O True
False

While Keynesian analysis focuses on the impact of tax policy on aggregate demand as a tool for short run stabilization, supply-side economists stress
that changes in marginal tax rates also have important long-run effects on the incentives to work, invest, and use resources efficiently.
Using the graph below illustrate how an increase in marginal tax rates would impact an economy under the supply-side view.
SRAS
X
AD
PRICE LEVEL
REAL COR
AD
11
SHAS
LRA

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