The notion that tax revenues initially increase with a higher tax rate but eventually decline as the tax rate increases is called
A)Laffer curve.
B)real business cycle theory.
C)policy irrelevance proposition.
D)small-menu cost theory.

Question

Quizplus · Accepted Answer

The notion that tax revenues initially increase with a higher tax rate but eventually decline as the tax rate increases is called the Laffer curve. This idea was popularized by economist Arthur Laffer and suggests that at a certain point, higher tax rates can actually be counterproductive and result in lower tax revenues due to changes in incentives for individuals and businesses.

The Notion That Tax Revenues Initially Increase with a Higher