The Laffer curve indicates which of the following?
A) There is an ideal interest rate that will maximize investment spending.
B) There is an ideal amount of government spending that will lead to full national employment.
C) There is an ideal tax-revenue-maximizing tax rate for government taxes.
D) There is an ideal income tax rate on individuals, depending on their consumption behavior.

Question

Quizplus · Accepted Answer

The Laffer curve shows the relationship between tax rates and the amount of tax revenue collected by government. It suggests that if tax rates are too low, tax revenue will be low because people have little incentive to work and earn money. On the other hand, if tax rates are too high, people will be discouraged from working and earning money because they keep less of each dollar earned after taxes. The ideal tax rate is the point where tax revenue is maximized, which is somewhere in between the two extremes.

The Laffer Curve Indicates Which of the Following