Question 26 (1 point) Which of the following is TRUE regarding the possible effe

Question

Question 26 (1 point)

Which of the following is TRUE regarding the possible effects of a tax change?

Question 26 options:

Lower taxes on household income reduce aggregate supply.

Higher tax rates on business profits encourage firms to boost production.

Higher marginal tax rates tend to depress economic activity.

Higher taxes on household income have no effect on the amount of labor households wish to supply.

Lower taxes on household income reduce aggregate supply.

Higher tax rates on business profits encourage firms to boost production.

Higher marginal tax rates tend to depress economic activity.

Higher taxes on household income have no effect on the amount of labor households wish to supply.

Explanation / Answer

Higher marginal tax rates tend to depress economic activity. If marginal tax rate is higher then firms and individuales lost their willingness to perform well.So the economy produces less output.

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