According to supply-side fiscal policy, increasing tax rates on wages and profits will: Group of answer choices result in higher unemployment and inflation. reduce both unemployment and the price level. lower the price level but raise unemployment. increase the real output as well as the price level.

The correct answer is the third option: lower the price level but raise unemployment.

Explanation:

To begin with, supply-side fiscal policies are the ones that tend to benefit the supply that an economy puts with the purpose of increasing it believing that the raise of it will cause an increase in the level of production of the economy. Secondly, if tax rates on wages and profits increase then the firms will have less income in order to hire more workers to produce more and therefore that the level of unemployment will increase. And if the unemployment increases then the price level will decrease due to the fact that the firms will not have many workers to pay and therefore they will lower the prices in order to sell more because of its low costs regarding wages

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