SAT Subject US History Practice Question 420: Answer and Explanation
41. Which statement best explains the trickle-down theory of economics?
A. Government-sponsored lotteries give people a chance to get rich.
B. Lowering the top income tax rates will spur economic growth.
C. Government programs that hire the unemployed lower the poverty rates.
D. Lowering the bottom income tax rates encour ages spending.
E. Low-interest government loans spur economic growth.
Correct Answer: B
According to this theory, if wealthy businesses owners spend less on taxes, they can spend more on hiring employees and perhaps lower the prices of goods and services. Therefore, the poorer classes will benefit from tax cuts for the wealthy.