Asked by Ellen Likens on May 25, 2024

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Upon which of the following propositions are supply-siders more likely to agree with Keynesians than with modern monetarists?

A) Rapid growth of the money supply generates inflationary pressures.
B) Raising government spending is the surest cure for a depression.
C) Transfer payments are expansionary because the poor have a higher marginal propensity to save than the rich.
D) Cuts in tax rates promote economic growth by the private sector.

Money Supply

The aggregate value of financial assets existing in an economy at a certain time.

Economic Growth

An increase in the amount of goods and services produced per head of the population over a period of time, often measured as the percentage increase in real GDP.

Tax Rates

The percentage at which an individual or corporation is taxed, which can vary depending on income level, type of good or service, and other factors.

  • Comprehend the fundamentals of supply-side economics and its position regarding taxation policies.
  • Differentiate between the perspectives of supply-side economists and those from alternative economic theories regarding fiscal and monetary policies.
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PRANSHU MUTREJAMay 26, 2024
Final Answer :
D
Explanation :
Supply-siders are more likely to agree with Keynesians on the idea that cuts in tax rates promote economic growth by the private sector. Both schools of thought believe that reducing tax rates can incentivize individuals and businesses to work harder and invest more, which can lead to increased economic activity and growth. Modern monetarists, on the other hand, may argue that changes in tax rates have little impact on economic growth and that the focus should be on controlling the money supply to combat inflation. Option A is more in line with the views of modern monetarists, who emphasize the importance of controlling the money supply to manage inflation. Option B is also more in line with Keynesian thought, which emphasizes the role of government spending in stimulating demand during a depression. Option C is a classic Keynesian idea that transfer payments can stimulate demand by increasing the purchasing power of those with a higher propensity to consume.