Asked by
Dusti Coker
on Dec 11, 2024
Verified
The Laffer curve illustrates the concept that
A) an increase in marginal tax rates will always cause tax revenues to increase.
B) an increase in marginal tax rates will always cause tax revenues to decrease.
C) when marginal tax rates are quite high, a decrease in the tax rate may cause tax revenues to increase.
D) when marginal taxes are quite low, an increase in the tax rate will probably cause tax revenues to decline.
Laffer Curve
A curve illustrating the relationship between the tax rate and tax revenues. Tax revenues will be low at both very high and very low tax rates. When tax rates are quite high, lowering them can increase tax revenue.
Tax Revenues
The income that is gained by governments through taxation.
Marginal Tax Rates
The rate of tax that applies to the next dollar of taxable income above a pre-determined threshold.
- Assess the repercussions of government actions like imposing taxes, providing subsidies, and setting price ceilings on market mechanisms.
- Identify the economic rationale behind public policy decisions and their theoretical underpinnings.
Verified Answer
RM
Learning Objectives
- Assess the repercussions of government actions like imposing taxes, providing subsidies, and setting price ceilings on market mechanisms.
- Identify the economic rationale behind public policy decisions and their theoretical underpinnings.