Assume that a large tax cut causes a budget deficit (as in 2004) or greatly reduces o surplus (as in 2001). What impact will this tax cut have on the economy, and future state of budget according to a suupply-side economist?
A. Incentives-increase work effort, increase savings, increase production, increase in investment spending = increase aggregate suupply = increase GDP
B. Future budget-tax cuts lead to increase in investment spending increase in economic growth = future higher GDP, more jobs, higher incomes