Apentix/AP US History/Unit 9: Period 9 (1980-Present)/Question
AP US Historyeasymcq1 pt

The supply-side economic theory that shaped Ronald Reagan's tax policies in the 1980s held that

A.cutting marginal tax rates would spur investment, growth, and eventually greater tax revenue
B.increasing government spending would stimulate consumer demand
C.raising income taxes on high earners would balance the federal budget
D.monetary policy alone could manage the economy without tax changes

Explanation

Core Concept

Reagan's 1981 Economic Recovery Tax Act cut the top marginal income tax rate from 70 to 50 percent on the theory that lower rates would expand the tax base. Supporters expected new investment and hiring to follow the cuts.

Correct Answer

Acutting marginal tax rates would spur investment, growth, and eventually greater tax revenue

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