Question

According to supply-side economics, which of the following is a result of lower marginal tax rates in an economy?

Producers increasing the domestic supply of goods and services

Consumers decreasing aggregate demand for goods and services produced in the economy

Producers moving resources out of production-oriented activities

Producers decreasing the prices of goods and services produced in the economy

Answer 1

Supply side economics tells us that high marginal tax rate strongly reduce income , output and efficiency of production . Marginal tax can reduce the incentive to work and thus reduce output . So lower marginal tax rates means that production will be higher in long run . Resources will be better utilized . Consumer demand will increase . Prices of goods and services also depends on aggregate demand . Answer : Producers increasing the domestic supply of goods and services