Relative to changes in tax and spending policies that affect the economy, which of the following statements is true?

Lower marginal tax rates typically incentivize working and saving by allowing individuals to keep more of their earnings. This statement is misleading because reduced tax burdens generally encourage economic activity rather than discourage it, leading to an increase in output instead of a decrease.

While high government debt can lead to increased interest rates, which might crowd out private investment, lower debt does not inherently crowd out investment. Instead, managing debt effectively can create a more favorable environment for investment in capital goods, potentially increasing output rather than reducing it.

Larger transfer payments can provide financial support to individuals, but they do not necessarily incentivize employment. In some cases, they may reduce the urgency to enter the workforce, thus having a neutral or even negative effect on overall output rather than a positive one.