What did Ronal Reagan obviously believe about the labor supply curve?

a. It was perfectly inelastic.

b. It was perfectly elastic.

c. It was relatively inelastic.

d. It was relatively elastic.

What did Ronal Reagan obviously believe about the labor supply curve? (d) It was relatively elastic. When Ronald Reagan cut taxes in the 1980's, his administration believed that the tax cuts would pay for themselves because of increased revenue as higher take-home wages (because of the tax cuts) attracted more workers into the labor force. This was based on the belief that the number of workers that would enter the labor force (the increase in the quantity of labor supplied) would be relatively high, meaning that he thought the labor supply curve was relatively elastic. This belief, however, turned out to be incorrect as the labor supply (at least in the short run) was relatively inelastic.