According to the Laffer Curve, a Cut in the Tax

question 139

Multiple Choice

According to the Laffer Curve, a cut in the tax rate from above the maximum-revenue rate to a rate lower than the maximum-revenue rate will

• A) decrease real GDP.
• B) increase tax revenues.
• C) decrease tax revenues.
• D) have no effect on tax revenues.

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Definitions:

Investment

The process of distributing funds with the aim of earning returns or profits.

Operating Efficiently

The practice of minimizing waste and maximizing resources to achieve optimal productivity and profitability in a business's operations.

Precautionary Motive

A theory explaining the demand for liquidity by individuals and firms as a safeguard against future cash needs and uncertainties.

Safety Margin

The difference between the actual value of a company's sales and the break-even sales, serving as a buffer for unexpected declines in revenue.