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Question
The supporters of a proposal to increase marginal taxes on those earning over $200,000 a year say this change would generate $100 billion in new tax revenues. A supply -side economist would argue that the actual revenue raised will be
A) less than $100 billion because some people will respond by working less.
B) exactly $100 billion because there are no offsetting factors to a tax increase.
C) more than $100 billion, because lower income people will work harder when they perceive the tax system to be fairer.
D) more than $100 billion because interest rates will also be affected.
Answer
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