Question

The Laffer Curve illustrates the relationship between:

• A. Government spending and budget deficits.
• B. Inflation rates and unemployment.
• C. Interest rates and economic growth.
• D. Tax rates and tax revenue.

Answer 1

Answer:

D. Tax rates and tax revenue.

• The Laffer Curve hypothesizes that as tax rates increase from zero, tax revenue will also increase, but eventually, higher tax rates will lead to a decrease in tax revenue as people are discouraged from working and investing.