The Laffer curve shows that increasing_________ increases _________when _________low.
A) tax revenue; potential GDP; tax revenue is
B) potential GDP; tax revenue; tax revenue is
C) tax rates; tax revenue; tax rates are
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The Laffer curve shows that increasing tax rates initially leads to an increase in tax revenue, but beyond a certain point, further tax rate increases lead to a decrease in tax revenue. This occurs when tax rates are already high and discourage economic activity, leading to a decrease in taxable income and a decrease in tax revenue despite the higher tax rates. Therefore, increasing tax rates increases tax revenue when tax rates are low, but beyond a certain point, it decreases tax revenue.

The Laffer Curve Shows That Increasing_________ Increases _________When _________Low

The Laffer Curve Shows That Increasing_____ Increases _When _____Low