Economist Arthur Laffer, Who Developed the Laffer Curve, Believed That

question 45

Multiple Choice

Economist Arthur Laffer, who developed the Laffer curve, believed that if taxes are raised drastically:

• A) people will work less because too much of their income will go to the government.
• B) people will work more because they need to offset money going to the government.
• C) people will demand more from government for their hard work, making government bigger and even more expensive.
• D) more people will become unemployed and collect unemployment benefits.
• E) the government would raise less money over time and ultimately go bankrupt because educated and skilled workers would leave the country for better opportunities elsewhere.

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Definitions:

Step-Down Method

A cost allocation method used in accounting to allocate overhead costs to various cost objects, starting with the department incurring the highest costs.

Service Department Costs

Costs incurred by departments that do not directly produce goods but provide support or services to other units within the organization.

Corporate Law

The body of laws, rules, regulations, and practices that govern the formation, operation, and dissolution of corporations, including their legal rights and obligations.

Personnel Costs

Expenses related to the compensation of employees, including wages, salaries, bonuses, benefits, and payroll taxes.