The Laffer Curve Studies the Relationship Between

question 65

Multiple Choice

The Laffer curve studies the relationship between

• A) tax rates and tax revenues.
• B) monetary policy and tax revenues.
• C) open market operations and the interest rate.
• D) taxes and the real interest rate.

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Definitions:

Fed

Short for the Federal Reserve System, it is the central banking system of the United States, responsible for monetary policy.

Reserves

Deposits that banks have received but have not loaned out.

Interest Rate

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, paid to the lender over a specified period.

Spending Multiplier

The ratio of the change in total output to the initial change in spending that brought it about.