According to the Laffer curve, an increase in the tax rate will decrease tax revenue
A) if the economy is on the positively sloped section of the curve.
B) if the economy is on the negatively sloped section of the curve.
C) if the economy is at the 0% tax rate point on the curve.
D) no matter the location of the economy on the curve.

Question

Quizplus · Accepted Answer

The Laffer curve illustrates the relationship between tax rates and tax revenue, suggesting that there is an optimal tax rate that maximizes revenue. If the economy is on the negatively sloped section of the curve, an increase in the tax rate will decrease tax revenue because it has surpassed the optimal rate, leading to disincentives for work and investment, and thus less taxable income.

According to the Laffer Curve, an Increase in the Tax