QUESTION 7 Which of the following statements about the tax cut enacted in 1981 i

Question

QUESTION 7 Which of the following statements about the tax cut enacted in 1981 is correct? O a. The tax cut was opposed by supply-side economists O b. The tax cut caused the recession of 1982. Oc. The tax cut was favored by Congress but opposed by the President and passed over his veto. Od. The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that tin Oe. The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982.

Explanation / Answer

d.The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that time.

In the long run, a tax cut will increase economics growth and tax receipts. But, in the short run, the tax cut will lower government receipts. During recessions, government outlays grows while tax receipts diminish.

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