The Laffer Curve Is Based on the Idea That If

question 129

True/False

The Laffer curve is based on the idea that if the tax rate is sufficiently high, then raising it even more will actually reduce total tax revenues. According to Laffer, this happens because the growing tax rates reduce economic activity at an even faster rate.

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Definitions:

Discount Rate

The interest rate charged to commercial banks and other financial institutions for loans received from the Federal Reserve's discount window.

Future Value

The value of an investment at a specific date in the future, accounting for factors like interest or dividends.

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth or interest.

Present Value

The contemporary valuation of a future amount of money or series of cash inflows, calculated with a particular rate of return.