The Laffer Curve Has Been Criticized by Mainstream Economists Because

question 8

Multiple Choice

The Laffer Curve has been criticized by mainstream economists because

• A)there is no theoretical possibility of higher tax rates leading to lower tax revenues.
• B)higher tax rates do not create negative incentive effects.
• C)tax cuts are just spent, not saved as predicted by the theory.
• D)savers look only at real interest rates, not nominal interest rates.
• E)empirically, tax cuts have not led to higher tax revenues.

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Definitions:

Total Income

Total Income refers to the aggregate earnings of an individual or organization from all sources before any deductions are made.

Benefits-received Principle

The concept that individuals should pay taxes in proportion to the benefits they receive from government services.

Gasoline Tax

A levy imposed by governments on the sale of gasoline, used primarily to fund transportation initiatives.

Lump-sum Tax

A fixed tax amount not dependent on the taxpayer's income level or financial transactions.