Figure 8-24.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.
-Refer to Figure 8-24.Tax revenue would
A)decrease if the economy began at point B and then the tax rate was decreased.
B)increase if the economy began at point F and then the tax rate was decreased.
C)decrease if the economy began at point C and then the tax rate was increased.
D)All of the above are correct.

Question

Figure 8-24.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-24.Tax revenue would
A)decrease if the economy began at point B and then the tax rate was decreased. 
B)increase if the economy began at point F and then the tax rate was decreased. 
C)decrease if the economy began at point C and then the tax rate was increased. 
D)All of the above are correct.

Quizplus · Accepted Answer

All of the statements are correct because the tax revenue is determined by both the tax rate and the level of economic activity. If the tax rate is decreased, tax revenue will decrease if the economy is in a recession (point B) or at full employment (point F). If the tax rate is increased, tax revenue will increase if the economy is in a recession (point C).