According to the Laffer Curve, If the Economy Is on the Positively

question 137

Multiple Choice

According to the Laffer curve, if the economy is on the positively sloped section of the curve, then

• A) both an increase and a decrease in tax rates will increase tax revenue.
• B) a decrease in the tax rate will increase tax revenue.
• C) an increase in the tax rate will increase tax revenue.
• D) both an increase and a decrease in tax rates will decrease tax revenues.

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Definitions:

Dividend Irrelevance Theory

A theory suggesting that the dividend policy of a company is irrelevant to its market value, focusing instead on its earnings and investment policies.

Stock Price

The cost of purchasing a share in a company, which can fluctuate based on market conditions.

Price Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings.

Stock Repurchase

A corporate action in which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.