Question

multiple choice 1 point
in order to stimulate the economy, the us government lowers personal income tax rates. why would this action be expected to promote economic growth?
the government would be less likely to engage in deficit spending (spending borrowed money)
manufacturers would have to pay more for raw materials
businesses would be required to hire more employees
consumers would have more money available to spend on goods and services

Explanation:

To determine the correct answer, we analyze each option:

• The first option is incorrect because lowering personal income tax rates doesn't directly relate to the government's deficit spending likelihood.
• The second option is incorrect as lower personal income tax rates don't impact manufacturers' raw material costs.
• The third option is incorrect because businesses aren't required to hire more employees due to personal income tax rate changes.
• The fourth option is correct: When personal income tax rates are lowered, consumers' disposable income (income after tax) increases. This means they have more money to spend on goods and services, which boosts demand and, in turn, promotes economic growth as businesses respond to increased demand by producing more, potentially hiring more workers, etc.

Answer:

D. Consumers would have more money available to spend on goods and services (assuming the options are labeled A, B, C, D in order, with the last option being D)