The Laffer Curve Suggests That If Tax Rates Are Very

question 45

Multiple Choice

The Laffer curve suggests that if tax rates are very high, _____ tax rates will _____ tax revenues.

• A) raising; increase
• B) reducing; increase
• C) reducing; decrease
• D) reducing; stabilize

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Definitions:

Price Rises

A general increase in the cost of goods and services in an economy, often indicating inflationary pressures.

Ration

The controlled distribution of scarce resources, goods, or services, often during shortages or in wartime.

Surplus

The situation in which the quantity supplied of a product exceeds the quantity demanded at a given price.

Excess Demand

A situation where the quantity demanded of a product exceeds the quantity supplied at a given price, often leading to price increases.